Platinum could be dark horse among precious metals, according to a money manager at Pacific Investment Management.
Nic Johnson, Pimcos managing director, says he prefers metal over gold.
Used in auto-catalysts of diesel engines and jewellery, its near cheapest ever relative to both bullion and palladium, after tumbling 14 per cent last year.While investors have poured into gold funds, theyve deserted platinum, which has fallen out of favour amid shrinking demand and excess supply.
The possibility trend reverses even slightly represents a buying opportunity, Johnson said.
With $1.72 trillion under management as of September, Pimco is one of worlds largest bond managers.Platinum is relatively unloved and relatively cheap compared to other precious metals, Johnson said in an interview last week.It would only take a rotation of a few percent of assets in gold exchange-traded funds moving to platinum to really have a big impact on platinum supply-demand balances and prices.Platinum was weakest of four major precious metals last year as environmental concerns reduce demand for diesel-powered automobiles.
By contrast, equity market turmoil and an increasingly dovish Federal Reserve have supported gold and silver, while palladium has benefited from its use in vehicles that run on gasoline.Golds premium over platinum hit a record at start of January after a rally in last quarter of 2018 pared its annual decline to just 1.6 per cent.Holdings in bullion ETFs are near highest level since 2013 as speculation grows Fed may ease its tightening pace or even pause in raising interest rates.
Meanwhile, holdings in platinum funds are close to a five-year low.
Being a much smaller market, even a marginal shift in flows from gold funds could have an outsize impact on platinum prices, according to Johnson.
The same is true for use in jewellery, he said.The possibility for some rotation exists and can have an asymmetric benefit to platinum, he said.Spot platinum traded at $800.12 an ounce on Wednesday, not too far from lowest intraday price in a decade, and gold was at $1,290.65 an ounce.