Platinum Rises for 6th Day in London on Demand, Supply Outlook

By Nicholas Larkin

Jan. 8 (Bloomberg) -- Platinum rose for a sixth session in London on speculation the U.S. government’s plans to bolster the economy will boost demand at a time when companies are cutting production. Gold was little changed.

U.S. President-elect Barack Obama proposed a $775 billion stimulus, while the Treasury pledged $13.4 billion to help General Motors Corp. pay bills. Platinum, used in autocatalysts, dropped 39 percent last year, forcing companies such as Lonmin Plc and Aquarius Platinum Ltd. to lower output from South Africa.

“The main factor behind the move is the stimulus package,” Peter Fertig, a consultant for Dresdner Kleinwort, said by phone from Hainburg in Germany. Proposed tax cuts may help consumers buy more metal-related goods and “the rescue for car manufacturers is a positive development for the industry,” he said.

Platinum for immediate delivery climbed as much as $27, or 2.8 percent, to $1,000 an ounce and traded at $986.50 by 12:40 p.m. in London. The metal, which yesterday traded above $1,000 an ounce for the first time since October, is up 5.6 percent this year.

General Motors said yesterday it has enough government loans to cover its worst-case forecast for U.S. sales and won’t need more money if the economy holds up. Automakers account for about half of global platinum and palladium consumption.

Ongoing Cuts

“Ongoing cutbacks by producers should continue to support platinum,” James Moore, an analyst at TheBullionDesk.com in London, wrote today in a note.

Platinum will average $1,100 an ounce this year, down from a previous forecast of $1,300, HSBC Securities said in a report.

“Weak automotive demand for platinum in 2008 will almost assuredly carry over into 2009,” New York-based analyst James Steel wrote. “Production cutbacks should only partly offset the decline in demand.”

Gold, which gained 5.8 percent last year, may decline as the European Central Bank cuts interest rates, potentially weakening the euro against the dollar and eroding the metal’s appeal as an alternative investment to the U.S. currency.

Bullion for immediate delivery added 68 cents, or 0.1 percent, to $843.63 an ounce. February futures rose $3.30, or 0.4 percent, to $845 in electronic trading on the Comex division of the New York Mercantile Exchange.

Investors indicate they expect the ECB to cut rates at least 50 basis points at its next meeting on Jan. 15, Eonia forward contracts show. European confidence in the economic outlook fell to the lowest on record and unemployment rose to a two-year high, data released today show. The Bank of England today cut rates to an all-time low.

‘Aggressive’ Cut

“Inflation statistics could raise investors’ expectations of an aggressive ECB rate cut,” Manqoba Madinane, a commodity analyst at Standard Bank Group Ltd. in Johannesburg, wrote in a report. That “would propel the greenback on the upside and weigh heavily on precious metals in the near term.”

The metal declined to $842.50 in the morning “fixing” in London, used by some mining companies to sell production, from $848.50 at the afternoon fixing yesterday.

Amongst other metals for immediate delivery in London, silver fell 1 percent to $10.93 an ounce, and palladium was unchanged at $197 an ounce.

To contact the reporter on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net