Platinum prices fell, trading almost on par with gold for the first time since 1996, on concern that the near-collapse of the US auto industry will erode demand for the white metal used in pollution-control devices in cars.
Platinum has plummeted 64% from a record in March, while gold has dropped 21%. Platinum closed $US1.60 an ounce above gold in New York, the smallest spread since at least 1996. Demand for industrial metals has plunged since June because of the slumping global economy.
``When platinum trades at the same value or lower than gold, it is screaming recession,'' said Leonard Kaplan, the president of Prospector Asset Management in Evanston, Illinois. ``It's another confirmation that we're in a deflationary recession, where everything goes down. Who's going to buy cars in a recession?''
Platinum futures for January delivery fell $US23.40, or 2.8%, to $US822.10 an ounce on the New York Mercantile Exchange. The price rose to a record $US2,308.80 on March 4.
Platinum pared losses after the Bush administration dropped its opposition to using the $US700 billion ($1 trillion) bank bailout fund to provide financing for US automakers. The Senate yesterday rejected a $US14 billion package in emergency loans.
Gold futures for February delivery fell $US6.10, or 0.7%, to $US820.50 an ounce on the Comex division of Nymex. The price reached an all-time high of $US1,033.90 on March 17.
Platinum last traded at parity with gold in December 1996. That year, the white metal averaged $US400.79, trading as high as $US436.90 and as low as $US369.10. Gold averaged $US389.94 and traded as high as $US420.20 and as low as $US367.70.
Platinum last closed below gold in December 1993.
Auto sales slump
Automakers account for 60% of global platinum use, according to Johnson Matthey Plc. Auto sales in the US fell for an 11th straight month in September, dropping 27% in the steepest slide since 1991. In Europe, car sales slumped 8.2% in September as the market suffered its worst decline since 2005.
Platinum surged in the first quarter as blackouts disrupted mining in South Africa, the world's biggest producer. Before 2008, the metal had rallied every year since 2001.
``Gold has a lot more going for it than the other precious metals,'' said Matt Zeman, a metals trader at LaSalle Futures Group in Chicago. ``The other metals don't have the same safe- haven appeal as gold. If investors are very anxious, they're going to be buying gold, not platinum.''
US equities headed for a second straight weekly decline. The Standard & Poor's 500 Index has dropped 41% this year as banks worldwide posted $US987.8 billion in credit losses and writedowns related to subprime-mortgage investments.
Retail sales slide
Retail sales in the US fell for a record fifth straight month in November, the Commerce Department said today. US auto-industry sales will decline 11% in 2009, Fitch Ratings said on Dec. 9.
Investment in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, rose 0.6% to 762.2 metric tons this week. It reached a record 770.6 tons on Oct. 10.
Investment in ETF Securities Ltd.'s platinum fund was at 166,043 ounces as of Dec. 11. The fund reached a record 418,247 ounces on July 4.
``The decline in automotive and truck sales has killed the demand for platinum,'' said James Turk, the founder of GoldMoney.com, which held $US419 million of gold and silver in storage for investors at the end of November. ``A lot of the speculative buying in platinum by leveraged hedge funds that occurred over the past couple of years is still being unwound. Gold is money. Platinum is an industrial commodity.''
`Area of liquidity'
Gold is down 2.1% this year, while platinum has dropped 46%. Gold's 2008 decline is the smallest among 16 of the 19 raw materials in the Reuters/Jefferies CRB Index. Cocoa, sugar and hogs have posted gains.
This week, gold rose 9.1%, the most since mid- September.
Still, gold's gains were limited as some investors sold the metal to cover losses in other markets, said Dennis Gartman, an economist and editor of the Gartman Letter in Suffolk, Virginia.
``Gold is being seen as the one area of liquidity where cash can be gotten,'' Gartman said. ``In this sort of environment, gold should rise, but its problem is that not only is it a store of value, but it is a store of liquidity.''
Silver futures for March delivery fell 19.5 cents, or 1.9%, to $US10.23 an ounce. The price has dropped 31% this year.
Palladium futures for March delivery tumbled $US9.20, or 5%, to $US175 an ounce. The metal has declined 54% this year.
