London - Platinum slid below $1,200 (R13,524) an ounce for the first time in five years and money managers cut bullish bets by the most since 2012 on concern demand is slowing from Europe to China as the appeal of precious metals wanes.
Hedge funds and other speculators reduced their net-long position in New York platinum futures and options by 26 percent in the week ended September 30, the most since May 2012, US Commodity Futures Trading Commission data show.
Speculators cut wagers on higher prices 70 percent from a record in July and are now the least bullish this year.
The metal last traded little changed after falling as much as 2.8 percent earlier today.
Prices fell 12 percent last quarter after a five-month mine strike ended in June in top producer South Africa and on concern that slowing growth in China and Europe will curb demand for the metal used in catalytic converters and jewellry.
Investors are losing faith in the commodity as an accelerating US economy adds to the case for rising interest rates and strengthened the dollar.
That curbs precious metals’ allure because they generally only offer returns through price gains.
“It’s a precious metal, so it’s getting the spillover from gold, and it’s an industrial metal,” Robin Bhar, an analyst at Societe Generale SA in London, said today by phone.
“At this time that duality is its own worst enemy. The number of longs in the market was huge and there was always a risk that this sort of liquidation would happen.”
Platinum for immediate delivery rose 0.3 percent to $1,228.75 an ounce by 1:09 pm in London, after falling to $1,190.25 earlier today, the lowest since July 2009.
Prices, which climbed to a 10-month high in July, are down 10 percent this year, set for the first back-to-back annual declines since 1997.
Factory Orders
German factory orders in August plunged the most since 2009, the Economy Ministry in Berlin said today, underlining the risk of a slowdown in Europe’s largest economy.
Europe is the biggest user of platinum in catalytic converters that reduce harmful emissions, and the second-largest buyer of the metal overall, after China, according to Johnson Matthey.
The Asian nation is the top consumer of platinum jewellry.
European car sales grew at the slowest pace this year in August, the Brussels-based European Automobile Manufacturers’ Association said Sept. 17, while October 1 data showed Japan’s auto sales declined 0.8 percent last month.
In the US, autos have sold at a 16 million annualised rate or faster in each of the last seven months, data from Ward’s Automotive Group show.
China, which ends a week-long holiday October 8, accounts for about 69 percent of global platinum jewellry demand, according to Johnson Matthey.
The country’s platinum imports rose 59 percent in August, after four months of declines, government data show.
Platinum’s drop and prices near that of gold may encourage more purchases, said Walter de Wet, head of commodities research at Standard Bank in Johannesburg.
Platinum Buying
“It’s very difficult to call a bottom at the moment,” De Wet said today by phone.
“We have to wait and see whether they start buying at these prices. We haven’t seen platinum at these levels for a while, so there should be some interest.”
Gold for immediate delivery was 0.6 percent higher today at $1,198.51 an ounce in London.
Platinum has typically been more expensive than gold.
An ounce of platinum bought as few as 1.0015 ounces of gold today, the least since April 2013.
The 10- year average is 1.45.
Investors own 84.2 metric tons of platinum through exchange-traded products, data compiled by Bloomberg show.
Holdings are at the lowest since May and 5.3 percent below the July 23 record.
That compares with gold-backed holdings that are at a five-year low and 36 percent below the 2012 peak.
Mine Strike
Mineworkers who downed tools over pay from January to June in South Africa deepened a third successive shortage.
Usage will outpace demand by 1.8 million ounces this year, before narrowing to 433,000 ounces in 2015, according to Barclays, which sees prices averaging $1,451 next year.
Still, fundamentals are “essentially a worthless indicator right now,” UBS wrote in an October 2 note.
While more than 1 million ounces were lost due to the South African strike, price rallies were capped because “abundant” inventories ensured supply, Barclays wrote in a September 17 report.
Above-ground stockpiles may total about 5 million ounces, Societe Generale’s Bhar said.
De Wet pegs the amount held, including in ETPs and by producers and users, at about 12 million ounces by the end of last year.
A strengthening US economy as European policy makers resort to more monetary stimulus to stoke growth helped push the Bloomberg Dollar Spot Index to a four-year high last week.
Gold, which slid 28 percent last year, erased its 2014 gains last week and is trading 38 percent below a record set in September 2011.
Gold Correlation
Platinum’s 30-week correlation coefficient to gold is at 0.67, with a reading of 1 signaling the two moved lockstep in the same direction.
The link between the metals, at the highest in a month, increased from 0.53 in April 2013.
The US Mint, which resumed production of platinum coins in March after a six-year halt, has sold 16,700 ounces this year, data on its website show.
In contrast, it has sold 384,000 ounces of American Eagle gold coins.
Gold sales totalled 856,500 ounces last year.
The US economy will grow 2.1 percent this year and 3 percent in 2015, economist estimates compiled by Bloomberg show.
The euro area will expand 0.8 percent in 2014, after two years of contraction, while China’s growth will slow to 7.3 percent this year and 7 percent in 2015, the lowest levels since 1990.
“Platinum’s very exposed to the European car market and data from the euro zone has been pretty terrible with barely any growth,” Societe Generale’s Bhar said.
“There are worries that China is slowing more than the government would like. Above-ground stocks seem to be pretty adequate. It’s going to take a few more years of more physical deficits to bring those stocks down.” - Bloomberg News