Steep fall in gold turns platinum at premium after over three years

 

After trading at a discount for over three years, platinum is trading with a fatty premium to gold. The premium, however, widened with the price of gold fell more steeply than gold on Wednesday. The spread between the two metals is currently working at around $54 an oz in London.

Gold fell severely in the last couple of days due to frequent sell by stockists and preventing fresh orders from new purchasers. After falling below the benchmark $1,600 an oz to settle at $1588 on Wednesday, the yellow metal is quoted at $1567.10 an oz in early Thursday trade in London. Gold has recorded a drastic fall of over $100 so far this month from the level of $1664.75 in the beginning of this month.

Data compiled by Kitco.com showed a similar decline in platinum which is currently trading at $1623 an oz from the level of $1672 an oz in the beginning of this month.

With the rupee’s depreciation continued, the discount of platinum over gold was not only covered but also took a “U” turn. Now, platinum is selling with a premium of Rs 350 an oz in India against a discount of Rs 250 an oz a couple of days ago.

On the Multi Commodity Exchange (MCX), gold contract for delivery in April was trading at Rs 29,426 per 10 grams, a decline of 0.52% from the previous day. At the current price, platinum would be available in physical market at Rs 30220 per 10g. Platinum contract is currently not available on the MCX.

Ajay Kedia, managing director of Kedia Commodity, a Mumbai-based broking firm, believes that platinum regained premium over gold after a long time which would continue in future as well.

Gold prices dropped to 6-month lows and settled at Rs 29579 per 10g after investors flocked to the safety of the deep and liquid dollar to await the release of the Federal Reserve's minutes from its latest monetary policy meeting. Weak housing data sent prices falling as well.

The Federal Reserve will talk monetary authorities on the need to consider when to wind down stimulus programs, including a $85 billion monthly bond-buying, pushed gold prices down. Monetary stimulus tools tend to weaken the dollar, which trades inversely from gold. Spotty data pushed down gold prices as well.

In the US the number of building permits issued in January rose 1.8% to 925,000 units, beating expectations for a 1.2% increase, according to the US Census Bureau. However, US housing starts fell by 8.5% to 890,000 last month, surpassing expectations for a 3.6% decline to 925,000. A separate report showed that the US producer price index rose 0.2% in January after contracting 0.3% in December, according to the Labor Department.

Kedia forecasts gold price to fall to $1470 an oz on weak buying sentiment translating thereby, at Rs 27,500 per 10g.