Platinum In Bear Market as Rates, Electric Cars Dent Outlook

  • Futures rise after touching six-month low in Nymex trading
  • Net-long positions have dropped for eight straight weeks: CFTC

Platinum is trading in a bear market amid prospects for higher U.S. interest rates and speculation that demand will slip for the metal used in auto pollution-control devices.

Futures on the New York Mercantile Exchange settled on Wednesday more than 20 percent below a recent closing high in August, meeting the common definition of a bear market. The metal had entered a bull market in March. The contract for January delivery climbed 0.6 percent to $947.80 an ounce at 10:57 a.m. in Singapore after touching $941 an ounce on Wednesday, the lowest since April.

Investors have soured on platinum, used in catalytic converters that help limit pollution from diesel vehicles, as automakers introduce more electric cars and diesel loses popularity in the wake of Volkswagen AG’s emissions-cheating scandal. A strengthening dollar and the outlook for higher U.S. rates have hurt demand for precious metals as stores of value.

“People are probably taking off some of their long-term bets that there may be need for more catalytic converters,” Brad Yates, the head of trading for Dallas-based refiner Elemetal LLC, said in a telephone interview. Also, “I’m not sure anything can stand in the way of the wind that is a strong dollar and higher rates.”

Platinum vs. Palladium

Platinum has slid 7.5 percent in the second half of 2016, while palladium, used to control pollution in gasoline-powered vehicles, has gained 8 percent. Money managers’ net-long position in platinum futures and options has declined for eight straight weeks, according to figures from the U.S. Commodity Futures Trading Commission.

Some 44.6 percent of cars sold in Germany in September had diesel engines, compared with 50.6 percent in January 2015, the newspaper Bild said this week, citing the Center Automotive Research at the University of Duisburg-Essen. Bild said diesel car sales may fall to 40 percent in 2017.

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