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Barclays upbeat on platinum price

Dineo Faku

Global financial services provider Barclays has forecast a fragile outlook for the gold price this year but is optimistic about a rise in the platinum price in the coming months.

Mines work under ground at the ...Sandfire DeGrussa Mine in Kalgoorlie, Australia, on Monday, Aug. 6, 2012. Photographer: Sergio Dionisio/Bloomberg. Credit: Bloomberg

Gold, which had been a front runner among commodities from 2009 until earlier this year, was expected to remain soft with the average price likely to rise 4 percent to $1 500 (R14 969) an ounce, Barclays managing director of commodities and research Kevin Norrish said last week.

The gold price suffered its largest one-day percentage drop since the 1980s in April due to a significant sell-off amid Cyprus’s banking crisis.

Gold firms been squeezed by the sell-off and have lost about $58 billion in market capitalisation since the beginning of the year.

Norrish was bullish about platinum prices and forecast a 22 percent increase to $1 750 an ounce this year.

“Short-term opportunities look best in platinum, and in palladium in the longer term,” Norrish said.

The forecast platinum price recovery would be good news for producers, although the fractious labour relations in the South African industry would disrupt supply.

Norrish said supply would be influenced by labour relations, as the Association of Mineworkers and Construction Union planned to strike at Lonmin unless a recognition agreement was signed.

Norrish said there had been a drop in the use of platinum in the production of diesel auto catalysts because palladium was a cheaper alternative.

Producers of platinum, most of which is mined in South Africa, are under strain owing to shrinking demand, softer prices, increasing cost pressures and labour unrest.

The average price of the precious metal has fallen about 10 percent since late January to $1 505 an ounce on Friday.

“We are positive about platinum, certainly in the next few months. Our view is that the platinum market is in balance and prices should be okay.”

South Africa has the biggest known reserves of platinum and produces nearly 80 percent of the world’s supply.

Norrish said base metals would lead the price recovery and predicted tin would strengthen by 29 percent to $26 000 a ton and lead would grow 26 percent to $2 450 a ton.

Norrish said commodity prices for the next three years would no longer be linked to financial crisis but supply and demand fundamentals.

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