Platinum group metals hit their highest levels in six weeks Friday in a continuing reaction to violence and a shutdown of production at a major South African mine, prompting worries about future supplies.
As of 10:24 a.m. EDT, platinum for October delivery was $21.10, or 1.5%, higher to $1,456.30 an ounce on the New York Mercantile Exchange. It peaked at $1,464, its strongest level since July 6. At the session high, October platinum had gained $67.80, or nearly 5%, from the Wednesday pit close.
Sister metal palladium lagged platinum on Thursday but is accelerating Friday, with the most-active September contract gaining $13.50, or 2.3%, to $596.95 an ounce. It has been as high as $602.25, its most muscular level since July 5.
Chart-based buying was triggered as the metals broke up through nearby resistance.
âPlatinum remains in the spotlightâ¦on fears of a spread of further violence after yesterday\'s tragic events at Lonmin\'s Marikana mine, causing further supply-side disruption,â said Steve Scacalossi, vice president and director for global precious metals with TD Securities.
The metal surged Thursday after South African police opened fire on striking workers at Lonminâs Marikana platinum mine. Police say they acted in self defense. More than 30 people have been killed in what was described as the largest death toll involving police action in the country since the apartheid era.
Lonmin had already halted production and said it does not expect to meet its full-year production guidance of 750,000 ounces. Various news reports say some workers went on strike over pay late last week, and tensions escalated amid a rivalry between unions.
Any supply disruptions in South Africa tend to capture the attention of the platinum market since some three-quarters of the worldâs primary output comes from the country. Lonmin is the worldâs third-largest producer, and Marikana accounts for 12% of the worldâs production, according to research notes from investment banks.
The market is watching to see whether protests and violence spread to other major platinum-mining companies, said one U.S. trader. He added that analysts who previously anticipated a platinum supply surplus this year are now reassessing their numbers, although this will hinge on how long disruptions occur and whether they spread.
âThe current conflict is also revealing a long-term problem, however--namely the massive explosion of costs in the South African mining industry,â said Commerzbank. âThe demonstrators are demanding further pay rises, despite wage increases of around 8.5% in both fiscal 2012 and fiscal 2013 having been agreed less than a year ago. The investment climate in South Africa is likely to deteriorate further, resulting in lower platinum production. This would suggest further climbs in platinum prices, both in the short and long term.â
Platinum previously had moved to a discount of some $230 an ounce to gold as the soft global economy hurt platinum-demand expectations. This is âway out of kilterâ compared to normal, since platinum historically has been the more expensive metal, said George Gero, vice president and precious-metals strategist with RBC Capital Markets Global Futures. However, he continued, attention to the South African violence has âwoken up traders to the disparity between platinum and gold,â with platinum outperforming and narrowing the gap during the latter part of the week. Platinum has been further helped by hopes that sales of automobiles, which use PGMs for catalytic converters, will pick up in the fall, Gero added.
Around mid-morning, spot goldâs premium over platinum had shrunk to around $161.
As platinum rose Thursday, traders cited short covering, which is buying to exit or cover positions in which speculators previously sold. However, Gero said, open-interest data also suggest there was also fresh buying. Data on the CME Group Web site show that the number of open Nymex platinum positions at the end of business Thursday increased by 858 contracts to 54,952 as the price of platinum rose sharply.
By Allen Sykora of Kitco News