Platinum Heads for Second Quarterly Gain on Dollar Weakness

By Glenys Sim

June 30 (Bloomberg) -- Platinum gained in Asia, heading for a second quarterly increase, as investment demand boosted by dollar weakness offset a slump in consumption by the auto industry.

The metal, used mainly in catalytic converters, is up 5.8 percent this quarter as the Dollar Index, which measures the greenback’s value against six major trading partners, slid 6.8 percent. Some investors buy precious metals as an alternative investment to a declining U.S. currency.

“Most commodities have benefited from the weaker U.S. dollar, as investors put aside weak fundamentals,” Yang Jun, an analyst at China Futures Co., said from Chongqing today.

Platinum for immediate delivery gained 0.6 percent to $1,194 an ounce at 10:59 a.m. Singapore time, up 28 percent this year. The metal lost 39 percent last year as a global recession curbed demand. Palladium lost 0.7 percent to $248.25 an ounce, still up 15 percent this quarter.

Platinum held in ETF Securities Ltd.’s exchange-traded fund backed by the metal stood at 322,865 ounces on June 26, up 89 percent since the start of the year. Palladium assets rose to a record 319,451 ounces June 19.

Still, a slump in the automotive sector may limit both metals’ gains. About half of platinum and palladium use is for auto parts, according to Johnson Matthey Plc, a London-based researcher and metal refiner.

Global vehicle output will drop as much as 20 percent this year, Robert Bosch GmbH, the world’s largest automotive supplier, said June 16. Japan’s 12 automakers decreased domestic production of cars, light trucks and commercial vehicles 41.4% to 542,282 units in May from a year earlier, according to the Japan Automobile Manufacturers Association yesterday.

“Platinum group metals are essential for construction of autocatalytic converters, which are required by law in virtually all auto producing nations,” said HSBC Securities analyst James Steel. “Any sign of a recovery in global auto demand would likely translate into higher platinum group metal prices.”

To contact the reporter on this story: Glenys Sim in Singapore at gsim4@bloomberg.net