Platinum Futures Drop as Equities Slump Prompts Moves Into Cash

By Dave McCombs

Oct. 8 (Bloomberg) -- Platinum futures in Tokyo fell for the eighth time in 10 days as the Japanese currency traded near a six-month high versus the dollar and Asian stocks plunged, prompting some investors to move money out of metals into cash.

The futures, down 58 percent from the record set in March, have plunged as declining equities signaled expectations demand for the metal will drop. A stronger Japanese currency reduces the appeal of yen-denominated futures for the metal, which trades globally in dollars.

``After the very weak Asian equity market and the stronger yen, we are seeing selling'' on the Tokyo Commodity Exchange, Wakako Harada, a trader at Mitsubishi Corp. in Tokyo, said today by phone.

Platinum for August delivery dropped 4.4 percent to 3,100 yen a gram ($952 an ounce) on the Tokyo Commodity Exchange at the 11 a.m. local time break. The most-active contract on Oct. 6 sank to 3,033 yen a gram, the lowest since July 15, 2005.

Metal for immediate delivery shed $46 to $968.50 an ounce at 11:07 a.m. in Tokyo, a 4.5 percent drop from New York yesterday.

Declines were exacerbated as the difference between bid and offer prices widened, a sign that fewer market participants are trading the metal, said Harada. Some participants are reluctant to trade because of concern that some banks may default on futures contracts, she said.

``It's getting worse,'' Harada said. ``The plunge in equities prices for some banks shows we cannot trust some of their credit ratings.''

Open interest, the total outstanding futures contracts, has fallen to half the average for this year, based on the 15-day moving average. Open interest is at 19,686 contracts on average for the past 15 days, compared with the one-year average of 33,318 contracts.

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