Platinum drops as equity slump spurs cash demand

Platinum fell for the first time in five days amid speculation that some investors would sell the metal to make up for losses in equities markets.

Platinum for immediate delivery dropped by $12 to $2,018.50 an ounce as of 5:33 pm in Tokyo, a 0.6 per cent decline from Monday in New York. The metal had jumped to a record $2,301.50 an ounce on March 4.

Asian stocks declined the most in six days owing to a growing concern that slowing global economic growth and credit losses would erode companies' earnings.

"Some hedge funds and speculators have large margin requirements and may face difficulties sourcing credit. Liquidating safe-haven type assets is a sure way to find that cash," James Moore, an analyst at TheBullionDesk.com, said. The selling probably won't reverse the "mid-to long-term bull trend for platinum", he said.

The metal for February 2009 delivery fell 56 yen, or 0.9 per cent, to close at 6,483 yen a gram ($1,977 an ounce) on the Tokyo Commodity Exchange. The most active contract has dropped 13 per cent since reaching a record 7,427 yen on March 6.

A power shortage in South Africa is raising concerns that supplies of platinum may fall short of demand, especially for jewellery and vehicle emissions filters that use it, Moore said.

Eskom Holdings, South Africa's state-owned electricity utility, earlier this month, began cutting power in some cities as it sought to replenish coal stockpiles and undertake maintenance work.

In January, the company cut power supplies to mines, forcing some to close for five days. South Africa accounts for about 80 percent of the global supply of platinum.

"Supply concerns are still very much in people's minds,"' Moore said. "The metal has established a base above $2,000 an ounce."