Quoted by Reuters, on Friday, Ken Hasegawa, a Tokyo-based commodity sales manager at Newedge Japan explained: “Oil is now in a new price territory and is likely to climb more as investors rework their positions, supported by the uncertainty and technical.”
Gold prices meanwhile were continuing to follow oil’s lead as risk appetites were dulled further on Barak Obama’s threat of US intervention as Sunni islamist militants extended their advance south.
The yellow metal spiked above $1,274 per ounce on Friday morning, helped too by weaker-than-expected US retail sales numbers.
At the same time that brent crude futures were heading toward $114 a barrel, platinum prices continued to fall as the 21-week long strike at the world’s three largest platinum mines in South Africa looked close to resolution.
While by no means certain, the fact that the latest offer by the platinum producers was accepted by the union and taken back to workers is a significant step forward. That said, the hammering out of the final details is likely to take some time, but pgm markets reacted strongly, with platinum spiking 2% lower, while palladium fell 4% on the news.
According to UBS’s Edel Tully, the knee-jerk reaction was to be expected and, indeed, “were tamer than one might have expected considering positioning and relatively poor liquidity conditions.”
But she added: “Follow through was limited after the initial decline, reflecting some lingering uncertainty and, more importantly, suggesting that investors are very much aware of the medium and long-term issues facing the SA platinum sector.”
However, Tully maintains the pullback is likely to be short-lived and is viewing it as a buying opportunity.
“It has been our view for some time now that a correction in PGMs would present an attractive entry point. SA supply issues do not end with a resolution of the 21-week old strike. Indeed, we expect supply to remain constrained through to Q4.”
Platinum is currently trading around $1,453 an ounce, while palladium is at $830 an ounce.
Tully also makes the point that the platinum/gold ratio retraced sizably to 1.1318 yesterday, helped in addition by rising tensions in Iraq and concerns about the country's oil production.
But she added: “Gold's move higher has been greatly enabled by the high penetration of gross shorts – the most recent COTR to June 3 showed that at 13.1moz, gold gross shorts were at their highest level in nearly five months. Granted, this figure is likely a good deal lower now, post-ECB move, but nonetheless there have been enough nervous shorts to fuel the current rally to $1275.”
