Platinum Market Update (June 21, 2012)

Macroeconomic concerns, especially with regards to the Eurozone, have been heavily weighing on platinum prices. The metal started May at $1,563 and by comparison, the fix price on June 1 was $1,403.

Elevated concerns tend to put platinum prices under pressure and result in a strong dollar. When concerns are moderate, platinum tries to make a move upward. Platinum prices made such a move upward during the first full week of June following a successful Spanish bond auction and the announcement of interest rate cuts in China, but that rally was short-lived because it was undermined by reemerging negative sentiment and profit taking.

The platinum market had largely been ignoring potentially bullish supply developments. However, last week when platinum prices rose, reaching $1,497 on Friday, some credit was given to investors focusing on news that adverse conditions are weighing on South African miners. It is also believed that the rise of platinum prices occurred in part due to expectations that the Federal Reserve would announce further easing measures.

Wednesday, following the conclusion of the two-day Federal Open Market Committee meeting, the markets appeared disappointed at the lack of aggressive policy. The Federal Reserve chose to extend its Operation Twist program, which is considered far less bullish for the metals market than quantitative easing. As such, industrial metals, including platinum, are expected to decline as a result.