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South Africa: Thirst for Precious Metals Unquenched
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Business Day (Johannesburg)
25 April 2008
Posted to the web 25 April 2008
Charlotte Mathews
Johannesburg
PLATINUM and palladium prices are likely to remain volatile this year but the climate for investing in precious metals will remain positive, London-based precious metals researcher GFMS said yesterday.
It forecast platinum would trade between $1700 and $2400/oz this year and palladium between $400 and $550/oz. Yesterday spot platinum was trading at $1991/oz while palladium was at $439/oz, with both metals tracking a drop in the gold price on a stronger dollar.
GFMS said platinum and palladium would trade at the higher end of these ranges if there were more output problems in SA or if gold broke $1000/oz -- which it saw as a real possibility.
In their annual survey of the platinum and palladium markets for last year and outlook for this year, GFMS said the main factor that influenced platinum prices last year was a decline in mine production. Global production dropped 6% compared with the previous year. It considered the chances were low that there would be a recovery in output this year.
Output from SA, which produces three-quarters of global platinum, fell because of safety related mine stoppages, shortages of skilled staff and labour unrest. In the US, platinum production declined 13% because of strikes and shortages of skilled labour.
Demand for platinum from various sectors, especially vehicle autocatalysts, was still strong, resulting in an overall deficit of about 200000oz. Platinum jewellery demand fell globally, but this masked an increase in demand from China, offset by declines in the US and Japan because of higher prices.
Production of palladium fell 4% last year, not only in SA but also in Russia and the US, while demand from the autocatalyst and jewellery sectors grew. The deficit was met by sales from Russian stocks. For the year, palladium showed a 260000oz surplus, but this was lower than prior years, GFMS said.
It said platinum and palladium production from Zimbabwe was stable last year and could grow modestly this year.
GFMS said platinum miners in SA were now "engulfed by a national energy crisis". There was considerable uncertainty over the effect on mines of operating at 95% power and on expansion plans. There was a risk SA's platinum output this year would fail even to match last year's disappointing total.
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This did not necessarily mean the global platinum deficit would grow. It would be tempered by the fact that, at higher platinum prices, jewellery demand would dip and platinum jewellery recycling would climb, GFMS said.
You know why the price is going up ? S.A.being by far the worlds largest producer is having power problems so a shortage is on the cards.
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