Is the bearishness surrounding platinum justified?

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All the analyst commentary surrounding the platinum price and the overwhelming bearishness has our contrarian noses twitching so we decided to look at the current supply:demand “imbalance” that has been held up as the reason for its underperformance this last year.

Platinum demand and supply 2009 to 2011 


 

We can see that the statistics actually point to a healthy demand picture over the last 3 years that has in fact outweighed supply. Throw into the mix the recent strikes in the primary platinum producing region – South Africa – and the near term supply:demand equation actually looks supportive for higher prices.

With hedge funds heavily short too, a nice recipe is brewing for a continued rebound in the price of platinum and, by default, major rebound potential in the oversold stocks such as Lonmin. Also, in the long run, the recent strikes do mean higher costs and are likely to result in restricted supply going forward and so further enhance the Buy case on the platinum producers.

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