Platinum Drops to Lowest Close in Three Years on Demand Concern

By Halia Pavliva

Oct. 17 (Bloomberg) -- Platinum, used in jewelry and car parts, plunged in New York to the lowest closing price since July 2005 on concern that an economic slump may curb demand for goods ranging from vehicles to wristwatches. Palladium gained.

Confidence among U.S. consumers sank more than forecast this month as job losses and financial-market turmoil raised the risk that spending will slump. Building started on the fewest U.S. single-family homes in 26 years, indicating that a three- year housing-market slump hasn't ended. A collapse in U.S. subprime-mortgage lending sparked a global financial crisis.

``The markets are still dealing with heaps of raw emotion, and greed is conspicuously absent from the mix of fear, panic, desperation, and even capitulation, that is flooding the average institution's or investor's psyche these days,'' Jon Nadler, a senior analyst at Kitco Metals & Minerals Inc. in Montreal, said today in a note to clients. U.S. consumer confidence and homebuilding data ``show more gloom in the system.''

Platinum futures for January delivery fell $10.30, or 1.2 percent, to $881 an ounce on the New York Mercantile Exchange, the lowest closing price for a most-active contract since July 20, 2005. The price fell 12 percent for the week.

``Fund liquidation remains the name of this game, and it appears that no amount of individual investor interest has been thus far able to stem the declines,'' Nadler said. ``One of these days, the noble metals will have to snap back from these oversold conditions.''

The price is down 62 percent from a record $2,308.80 in March. The most-active contract has fallen 42 percent this year.

Auto Sales

Prices collapsed partly because auto sales have plunged in the U.S., the world's biggest market. More than 60 percent of global platinum consumption is for parts in exhaust-emissions filtering components for car and truck engines, according to London-based metals trader Johnson Matthey Plc.

Platinum lost 50 percent in the third quarter and 31 percent last month, the worst such declines since at least 1986.

``Many assets are undergoing distress liquidation, as investors rush for the door,'' John Reade, the head of metals strategy at UBS AG in London, said today in a research report. ``This deleveraging has become self re-enforcing and has the potential to push individual commodity prices to silly levels -- just look at platinum, now trading only 10 percent above gold on a spot basis and at a discount a few years forward.''

Palladium futures for December delivery rose $1.40, or 0.8 percent, to $174.50 an ounce in New York. The price plummeted 56 percent in the third quarter and 34 percent last month, the biggest declines since at least 1986. Most-active futures have dropped 54 percent this year.

To contact the reporter on this story: Halia Pavliva in New York at hpavliva@bloomberg.net.