Platinum Futures Drop on Speculation Commodity Demand May Wane

By Dave McCombs

Sept. 1 (Bloomberg) -- Platinum futures in Tokyo fell for the first time in five days as crude oil prices gained less-than- expected on Hurricane Gustav, prompting speculation that investor demand for commodities may be fading.

The metal dropped as much as 3.6 percent as the hurricane approached the U.S. Gulf coast, halting most regional oil and gas output. Some traders had expected the shutdowns to cause a bigger surge in oil prices, said Kazuhiko Saito, a strategist at Interes Capital Management.

``Crude oil isn't rallying much, so after the open today, platinum and gold turned down,'' Saito said by phone in Tokyo.

Platinum for August delivery dropped 1.8 percent to close at 4,985 yen a gram ($1,437 an ounce) on the Tokyo Commodity Exchange. The most-active contract fell 16 percent in August, the biggest monthly decline since October 1998.

Metal for immediate delivery sank $27.25 to $1,459.25 an ounce at 5:39 p.m. Tokyo time, 1.8 percent less than in New York on Aug. 29.

Futures are likely to stay at or below 5,000 yen a gram for the rest of the week, Saito said.

Platinum, used in jewelry and vehicle exhaust systems, has dropped 6.6 percent this year in Tokyo on speculation that a spreading slowdown in global economic growth would cut car sales.

As for Gustav, ``the market has taken it in a very calm way,'' said Bob Takai, general manager of financial services at Sumitomo Corp., Japan's third-biggest trading company. `` At the moment, general sentiment is not very positive for the commodities complex.''

Platinum consumption by automakers accounts for more than 60 percent of global platinum demand, according to Johnson Matthey Plc, which makes about one-third of the world's auto catalysts.

Crude has dropped 21 percent from the record high $147.27 a barrel set on July 11, while platinum futures are down 33 percent from the all-time high 7,427 yen a gram set in March. Oil for October delivery rose 54 cents, or 0.5 percent, to $116 a barrel in after-hours electronic trading on the New York Mercantile Exchange at 5:52 p.m. in Tokyo.

To contact the reporter for this story: Dave McCombs in Tokyo at dmccombs@bloomberg.net