Gold Premium Over Platinum Increases

In recent weeks the platinum price has been clearly underperforming in relation to gold, with gold now more than $100 more expensive than platinum.

According to the latest report from the German precious metals trading group Heraeus, in recent weeks platinum long positions at futures markets have dropped more than 30%. In early trading today platinum dropped below important support at $1,540 per troy ounce – a sign that the current sell-off might not be finished. Despite this bearish data, India’s Bullion Market Association expects platinum imports into India to increase by as much as 50% – or 20 to 22 tonnes.

This rapid increase in platinum imports could be due to the Indian government's decision to raise import and trading taxes on gold and silver in an effort to fight India's growing current account deficit and to avoid further devaluation of the rupee. Yesterday brought news that controls at the Indian airports will be tightened to try to prevent gold and silver from being smuggled into the country.

Meanwhile, the supply situation at the platinum markets remains tense, mainly owing to mining companies' rapidly increasing production costs. Furthermore, an increasingly complex geopolitical situation is also hindering some companies. Markets were therefore cheered by news that Canadian mining company Platinum Group Metals has discovered a new platinum deposit in the famous South African Bushveld Igneous Complex.

There has been talk recently about how South Africa is on the decline in terms of mining, but skeptics may be being unduly pessimistic. There are some silver mines in Latin America that are still operating centuries after they were first discovered, and likewise South Africa still possesses an impressive basket of geological assets – even if the more accessible metal deposits have been depleted. Though a lot depends on the political and business environment, commodities can still make a big contribution to prosperity in the country.