Platinum set for price appreciation

Autocatalyst demand strong

By Darin Tyson-Chan
Wed 10 Feb 2010

The outlook for the precious metal in the long term is solid.

Platinum has experienced a rebound in its value recently and is set for a further appreciation in the long term, according to a senior analyst at ETF Securities.

The price of the precious metal did suffer during the global economic downturn that saw jewellery demand and autocatalyst demand from the motor vehicle industry fall in 2009, ETF Securities senior analyst Martin Arnold said.

"Because of the sharp slump in auto sales due to the loss of employment across the globe from the financial crisis, we have seen a somewhat reduced demand from autocatalysts," he said.

However, Arnold predicted a very positive longer-term outlook, with an expected increase in demand driven by emerging markets as they begin to implement a greater level of carbon emissions controls in their automobiles.

Investment demand was also identified as a positive factor for the value of platinum.

"We are seeing investment demand accounting for around about 10 per cent of total demand for platinum and that's the highest level in about 10 years," Arnold said.

Apart from the anticipated increase in platinum values, the precious metal will also provide investors with a good diversification tool against the rest of their portfolios.

"Platinum has a similar volatility to the S&P 500 ... and has generally outperformed equity markets over the short and longer runs," Arnold said.

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