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Fund, ETF 'fire sales' causes of platinum's collapse – Johnson Matthey analyst
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28th November 2008
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The main causes of the collapse of the platinum price were “very significant” disinvestment in exchange-traded funds (ETFs) and fire sales of platinum held by investment funds, Johnson Matthey principal market analyst Alison Cowley said last week.

Cowley said in an interview on the sidelines of the release, in Johannesburg, of Johnson Matthey’s ‘Platinum 2008’ report that the price collapse was “very much an investment fund issue”.

While demand was down from where it was six months ago, Cowley pointed out that demand had “certainly not fallen in the catastrophic manner that the change in the price might lead people to believe”.

The urgency of getting out of the metal and into cash was all part of the global credit crunch and the large decline in sales to the automotive sector in North America, which was still viewed as being very important for platinum.

“Increasingly, that’s not the case. Increasingly, the important markets for platinum are elsewhere. “They are in diesel, in Europe and in China, which is increasingly a very important market for platinum,” she said.

Although China’s economic growth rate had slowed, there was currently still growth in China, with more growth to come.

“At the moment, the market is not really listening to the good news and was just listening to the bad news, and that may continue to be the case for some time,” she said.

Johnson Matthey was forecasting that platinum would trade between $700/oz and $1 400/oz in the next six months.

Edited by: Martin Creamer

 

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