Platinum at 25-year high on rising demand

Strong demand from jewellery manufacturers and other industrial consumers pushed up spot platinum to 25-year high at $957 per troy ounce on the Tokyo Commodity Exchange.

Although investors have not yet accepted platinum for investment purposes, the prices of this precious metal are moving in tandem with gold's mainly because of rising demand from teenage jewellery users.

"Platinum is gradually becoming the first choice of top-class jewellery lovers, but it will soon attract the middle-class as well. The metal looks so attractive that teenage jewellery lovers are drawn to it at their very first glance at the shop," a Mumbai-based jewellery manufacturer said.

"Once you are at a platinum jewellery shop, you cannot hide your preference to this precious metal. You are tempted to buy at least one piece because of its aesthetic look," the trader added.

Platinum is gradually moving towards its all-time high level of $1,040 per ounce, recorded in 1980 when all-round demand boosted the metal price substantially.

"Platinum prices are higher due to strong demand for the metal as well as the very tight platinum inventory. The ultimate goal for the platinum market appears to be the $1,000-per ounce mark," another trader said.

"Platinum application as an auto catalyst is also increasing day by day, and it has no substitute, luckily. Therefore, demand will surely increase going forward," said yet another trader.

Prices were hovering around $844 per ounce at the beginning of the year and have gradually moved up to the current level with a series of intermittent rises and falls.

In 2004, platinum demand surged by less than 1 per cent for the second year in succession, rising by just 50,000 ounce to 6.58 million ounce. Mine supply, too, increased by 3,00,000 ounce to 6.5 million ounce as South African output exceeded 5 million ounce for the first time, resulting in a narrow deficit of 80,000 ounce.

In India, use of platinum is growing largely as an auto catalyst. The world's demand for platinum as auto catalyst grew 7 per cent in 2004 to 3.51 million ounce, spurred by growing European diesel car production and tightening emissions limits for cars in the continent and heavy vehicles in Japan.

Demand for auto catalysts in India has been growing at approximately 25 per cent year on year, while demand from other industries rose 11 per cent to 1.53 million ounce in 2004, mainly owing to increasing production of LCDs in Asia, including India.

However, worldwide jewellery demand for platinum fell 12 per cent to 2.2 million ounce. Manufacturers in China reduced purchases to just over 1 million ounce in reaction to high and volatile prices at the beginning of the current year.