Platinum prices forecasted to rally in 2013 say Bank of America Merrill Lynch Global Research

Platinum prices are forecasted to be underpinned by strong fundamentals in 2013 argue Bank of America Merrill Lynch Global Research.

Prior to the recent correction lower, platinum had risen more than $300/oz on the back of Quantitative Easing and unrest in South Africa.

We believe many of the issues in South Africa's PGM (platinum-group metals) industry are structural, suggesting the challenging operating environment will persist. This is one reason we are bullish for 2013 and beyond; in our view, the structural medium-term bull story is not under threat from the introduction of electrified vehicles," says a note from the Global Commodity Research team.

However, given that demand growth is subdued for now and considering that sustained supply-led rallies are rare, analysts see scope for further downside from here through 4Q.

With regards to the unrest in South Africa, if some of these disruptions continue, "we see the platinum market in a 250koz deficit this year. Many of the issues in South Africa's PGM (platinum-group metals) industry are structural, i.e. they have more to do with perceived social inequality than individual corporate problems. While the immediacy of the strikes may subside, this suggests South Africa's operating environment will remain challenging," says the note.

Bank of America anticipate a rebound of global platinum off-take next year.

"With miners in our view unable to increase production meaningfully, this will keep the market in deficit and should then also lead to a more sustained rally," says the bank.

However, price declines in the near term are forecast:

"Yet, even though we remain structural bulls and see scope for price rises in 2013, we believe there is a risk quotations could fall further from here, given the current demand weakness. After the recent correction, our preferred structure would have been a put spread, but the smile makes this structure expensive. Hence, we suggest buying a short-dated put, maturing within the next 4-6 weeks."

Source: http://www.economy-news.co.uk/stocks/1851-platinum-price-forecasts