Platinum Drops to a Seven-Week Low on South Africa Accord

Platinum fell to the lowest in almost seven weeks in New York, narrowing its premium to gold, on reduced concern that South African supply will be disrupted and amid an election stalemate in Italy. Gold futures rose.

The Association of Mineworkers and Construction Union signed an accord yesterday aimed at keeping peace and stability in the mining industry in South Africa, the biggest platinum producer, days after the country’s largest union endorsed the plan. Global equities fell to the lowest in almost six weeks and the euro reached a seven-week low against the dollar earlier today as results suggested Italy’s election would result in a hung parliament, possibly leading to another vote.

“Anything to do with the South African mining industry” can affect prices, Marc Ground, a commodity strategist at Standard Bank Plc in Johannesburg, said today by phone. “The market is a bit nervous. Because the platinum market is so overstretched, it doesn’t take much for people to start selling.”

Platinum futures for delivery in April slid as much as 2.4 percent to $1,581 an ounce, the lowest since Jan. 9, and were at $1,600.40 by 7:27 a.m. on the New York Mercantile Exchange. The metal for immediate delivery was 0.4 percent lower at $1,599.40 in London.

Futures trading volume was more than double the average in the past 100 days for this time of day. The metal jumped as much as 13 percent this year as Anglo American Platinum Ltd. (AMS), the biggest producer, said it plans to cut output. An ounce of platinum bought as little as 0.9945 of an ounce of gold in London, the least since Jan. 22, data compiled by Bloomberg show.

Gold Price

Gold futures for April delivery gained 0.3 percent to $1,591.60 an ounce on the Comex in New York, after reaching $1,602.30 today, the highest since Feb. 20. The metal traded above platinum in London for the first time this month earlier today.

“Physical demand is extremely good,” Bernard Sin, head of currency and metal trading at bullion refiner MKS (Switzerland) SA in Geneva, said today by phone. “Anything below $1,600 an ounce is reasonably cheap.”

Bullion is still down 5 percent this year as some Federal Reserve policy makers advocated more flexibility in stimulus. Holdings in the SPDR Gold Trust, the biggest gold-backed exchange-traded product, fell 7.8 metric tons to a six-month low of 1,272.9 tons yesterday, data on its website show.

Gold’s price cycle has probably turned as the recovery in the U.S. economy gathers momentum and investment holdings collapse, Goldman Sachs Group Inc. said in a report yesterday. The bank cut its three-month target to $1,615 from $1,825 and lowered the 12-month forecast to $1,550 from $1,800.

Silver for May delivery declined 0.8 percent to $28.815 an ounce. Palladium for June delivery fell 1.9 percent to $736.90 an ounce.

To contact the reporter on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net

To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net

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