Recession continues, carmakers possibly looking for replacement for platinum…

Marth 16th, 2008

Reported by Kimberly Birkland

Platinum and palladium both fell today on forecasting that the US economic recession will cut demand for the metals used in jewelry and catalytic converters.

“The US is in a recession, and the decline may be much worse than past contractions.  Before today, platinum jumped 38 percent this year on supply disruptions in South Africa, the world’s biggest producer,” said Martin Feldstein, Harvard University economist.

“Platinum was supported by a power shortage in South Africa earlier, and now that problem is solved,” said James Steel, an analyst at HSBC Securities in New York.

While platinum and palladium futures both fell for April and June delivery, although the metals still climbed this week.

A Bloomberg survey showed that the metals will probably drop next week, and five of seven traders and analysts advised selling.

Ron Goodies, a futures trading director at Equidex Brokerage Group Inc. in Closter, New Jersey says “there is a concern that prices stretched beyond reasonable limits, and short-term, it’s time to be very careful.”

South Africa reported a decline in output in January.  While production of platinum-group metals fell 16 percent from a year earlier after mines closed because of electricity shortages, the Chamber of Mines of South Africa said yesterday.  (www.bloombergnews.com)

South Africa has said mines will be limited to 95 percent of normal electricity needs until 2012 because of inefficient and insufficient generating capacity.  Many investors buy platinum-palladium metal groups as a hedge against inflation.  The trend is continuing to grow.

As crude oil rose to $111 a barrel in New York yesterday, and inflation in China accelerated to an 11-year high last month, while the euro jumped to its highest in more than 14 years in February.  People are trying to hedge against inflation by buying gold worldwide.

Gold went up to $1,000 an ounce for the first time yesterday, partly as mounting credit-market losses prompted investors to buy bullion as a hedge for weakening dollar and equities.