Platinum hits bottom

Weakness in the eurozone has hit the price of platinum.

Platinum has lost its polish. The price of the metal has sunk to below $1,120 an ounce, depths it hasn't plumbed since the aftermath of the global financial crisis six years ago. Demand for the metal has been hit by the weak eurozone economy.

The eurozone is the world's biggest market for diesel cars, which use platinum-based catalytic converters. These account for around 40% of overall platinum demand.

Meanwhile, supply has recovered following a five-month strike in South Africa, the main supplier of mined platinum, in the first half of the year. As a result of increased supply and lower demand, the market deficit (the gap between the two) has shrunk by around 60%.

But has the slide gone too far? Despite the ongoing threat of Greece leaving the eurozone, the European economy is showing signs of recovery. European car sales recently rose for the first time in six years. The economic recovery in India, along with tighter emissions standards, should stimulate emerging-market demand.

Low prices bode well for jewellery demand, which comprises around 38% of the total. And further strikes in South Africa can't be ruled out. GFMS, a metals consultancy, reckons that there is scope for "a modest uptick" in prices to the $1,300-1,350 range this year.

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