New York: Platinum fell from a record in New York on concern that a 40% gain this year may cut demand from jewellery makers. Palladium dropped from a six-year high.
Jewellers use about a quarter of the world’s platinum supply, the second biggest consumers after car makers, who use the metal as an emissions catalyst. Platinum consumption by jewellers has declined for five years as prices rose, according to refiner Johnson Matthey Plc. in London.
Jewellery “demand fell sharply as prices spiked to record highs,” said Jon Nadler, senior analyst at Kitco Inc. bullion dealers in Montreal.
“In particular, Japanese demand was recording figures of more than half a million ounces annually as of just two years ago, nowhere near the almost 2-million-ounce peak recorded in 1997.”
Platinum futures for April delivery fell $14.30 (Rs574.86), or 0.7%, to $2,138.80 an oz on the New York Mercantile Exchange. Futures fell for the first time in five sessions after reaching a record $2,174 on Tuesday.
“Platinum has tremendous demand,” said George Gero, senior vice-president of RBC Capital Markets in New York, in a Bloomberg Television interview. “I’m talking not just about jewellery but the catalytic converters,” Gero said. “A lot of people don’t know that catalytic converters are used by the oil industry to exchange crude oil into heating oil and gasoline.”
Platinum also declined after the Tokyo Commodity Exchange (Tocom), the world’s largest market for the metal, said it will increase its margin by 50,000 yen ($462) per contract, Nadler said.
“Apparently there were fewer speculators willing to live with the sharply higher margin requirements for platinum contracts that Tocom will impose as of Thursday,” Nadler said. “Players also weighed the emerging trend of heavy scrap platinum sales and decided that cashing in some (very profitable) chips was in order.”
Platinum still has gained 40% this year, ahead of its 33% increase for all of 2007. It is also outpacing gold, which is up 12% in 2008. “We continue to recommend investors look to hold on to their core long positions in platinum and would ‘bang the table’ to buy a lot more below $1,900 an ounce,” UBS AG analyst Robin Bhar wrote in a report from London on Wednesday. “There are clear risks that selling into what might look like a short-term top may mean never getting back into this trade.”
Most South African mines shut for five days last month after Johannesburg-based Eskom Holdings Ltd couldn’t guarantee power supplies. Eskom later agreed to provide industrial users with 90% of their usual requirements, and said that will continue until 2012. The nation supplied about 78% of?the?world’s?platinum?in?2006.
Danielle Rossingh in London and Carol Massar in New York contributed to this story