Is platinum an early sign of economic springtime?
March 30, 2009
By Ethel Hazelhurst
While the global motor industry is still in disarray, platinum is looking pretty good. Having troughed in October at just more than $770 (R7 422 at the current exchange rate) an ounce, the metal hit a high of $1 153 on Friday - a recovery of nearly 50 percent - before retreating to $1 131.
According to Bloomberg, Deutsche Bank ascribed the improvement to "relatively robust" jewellery demand, while Reuters quoted Citigroup linking it to expectations that the US government would provide aid to its car makers. The metal is used in catalytic converters, which reduce pollution from cars.
Whatever the reason that platinum, according to Reuters, was "headed for its second weekly increase and fifth monthly gain", the price surge seems a sign that the end of days is no longer nigh.
It's worth noting that it is South Africa's biggest export.
Commodity prices generally are looking better than they were a few months ago. The Economist's all commodities index shows a bounce back, starting in December. This signals some revival in global growth, which is confirmed by a sharp recovery in the Baltic Dry index, a measure of shipping activity, since December.
Higher commodity prices and less anxiety in the financial markets has allowed the rand to pull back from its weakest point of R11.60 to the US dollar, to close at about R9.5732 on Friday.
Things, of course, are still looking bleak.
The International Monetary Fund forecast two weeks ago that the global economy will shrink by between 0.5 percent and 1 percent this year, with advanced economies shrinking the most - between 3 percent and 3.5 percent.
However, it seems there is still a chance that emerging economies could decouple from the West. The decoupling theory was abandoned when exports plunged worldwide; but some economists are predicting it could happen on the recovery leg.
