ETF talk boosts platinum but analyst says there's too little metal for one

Section:

Platinum Surges to Record
on Speculation Over EFT

By Chia-Peck Wong
Bloomberg News Service
Tuesday, November 21, 2006

http://www.bloomberg.com/apps/news?pid=20601103&sid=awqfkHR79NDw

SINGAPORE -- Platinum for immediate delivery jumped to a record amid speculation that an exchange-traded fund may be introduced, potentially boosting demand for the commodity.

ETFs purchase and store metal, allowing investors to trade assets without owning them. Silver had its biggest jump in 11 years on April 28, when Barclays Plc began offering a silver- backed ETF.

"There's continued heavy speculation about the launch of the ETF," Peter Tse, chief precious metals dealer at ScotiaMocatta, the bullion arm of Bank of Nova Scotia, said today from Hong Kong. The speculative buying led some investors who had bet on price drops to buy to settle these money-losing positions, further lifting prices, he added.

Spot platinum rose as much as $92, or 7.3 percent, to a record $1,345.50 an ounce. It traded at $1,325.50 at 11:47 a.m. Singapore time. The one-day gain is the biggest since May 2000.

The introduction of a platinum ETF may add "between 5 and 15 percent," to the price, Wolfgang Wrzesniok-Rossbach, head of marketing and sales at Heraeus Metallhandels GmbH in Hanau, Germany, which owns five precious-metal refineries, said in an e-mail yesterday.

Metal for January rose $10.80, or 0.9 percent, to $1,245.10 an ounce on the Comex division of the New York Mercantile Exchange in after-hours trade at 11:33 a.m. Singapore time.

Platinum for October 2007 delivery rose as much as 145 yen, or 3.3 percent, to 4,547 yen ($38.5) a gram on the Tokyo Commodity Exchange, the highest since Sept. 11. It traded at 4,525 yen a gram by the midday break.

Still, the much-speculated introduction of a platinum ETF wasn't likely as the global supply of the metal wasn't sufficient to support one, said ScotiaMocatta's Tse. "There isn't that much platinum, while you have no difficulty getting gold anywhere," he said.

The supply of the metal, used mostly in car catalysts and jewelry, will rise 5.3 percent to a record 7 million ounces this year, Johnson Matthey, the world's biggest distributor of platinum group metals, wrote in a report on Nov. 14. Last year, global gold supply was 4,070 tons, or 130.9 million ounces, according to London-based consultant GFMS Ltd. which compiles figures for the World Gold Council.

Even if the ETF doesn't go ahead, demand growth for platinum is enough to push prices higher, Koichiro Kamei, president of Market Strategy Institute Inc. in Tokyo, said today. "Industrial demand is rising," he said.

Demand for platinum will increase 5 percent to a record 7.02 million ounces, leaving the market with a deficit of 20,000 ounces, the London-based Johnson Matthey said.

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