Investors demand platinum

The sharp fall in the platinum price between June and August 2001 stimulated strong interest in platinum investment products in both the U.S. and Japan.

Sales of platinum coins from the U.S. Mint increased rapidly in the second half of the year and lifted the net demand for small bars and platinum coins by 10,000 oz., to 50,000 oz. Similarly, Japanese purchases of investment bars increased from July onwards, and, for the year as a whole, outweighed disposals by 30,000 oz.

Demand for the U.S. Mint’s platinum series of proof and bullion coins fell, year over year, during the first six months of 2001 as the platinum price averaged almost US$600 per oz. However, sales climbed steeply as the price began to fall; they increased by 70% during the second half of 2001, compared with 2000.

The investment attraction of platinum bullion coins was further enhanced by the fall in U.S. equity prices during the first nine months of the year. Sales of U.S. Eagle coins continued at strong levels during the first quarter of 2002, increasing by 14% in comparison with the first quarter of 2001.

A loan of $196,000 of platinum to the U.S. Mint by the Defense Logistics Agency has now been repaid, though the Mint is believed to have purchased a proportion of the metal borrowed. The Mint is expected to maintain its working stock of platinum by making annual purchases of metal on the spot market in future, as demand dictates.

The first few months of 2001 saw Japanese sales of large bars far outweigh new purchases as the price exceeded 2,500 yen per gram. The Japanese market for 500-gram and 1-kg bars is highly price-sensitive; therefore, as the platinum price began to fall, buying accelerated. — The preceding is from Platinum 2002, published by London-based Johnson Matthey.