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Platinum takes a breather after hitting 6-1/2-year peak

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Platinum bars

Tomohiro Ohsumi | Bloomberg | Getty Images

Platinum prices eased in choppy trading on Tuesday after rallying to a near 6-1/2-year high on bets that a pick-up in global economic activity this year would boost demand for the industrial metal.

Platinum fell 0.3% to $1,298.38 an ounce, having earlier hit $1,336.50, its highest since September 2014.

“Platinum’s fundamentals have not yet improved… there is a positive story coming but the market is still in a fabrication surplus, and that’s challenging price dynamics,” said UBS analyst Giovanni Staunovo.

Prices have rallied as much as 25.1% this year, driven by hopes that increased demand for automobiles and a push for cleaner energy would spur demand for the metal used in automobile catalytic converters to limit exhaust emissions.

“While the upswing in the platinum price was fundamentally justified at first given its previous undervaluation and the expectation of a renewed supply deficit, we now see signs of speculative excess,” Commerzbank analysts said in a note.

On the technical front, “the 14-day Relative Strength Index (of platinum) is now in overbought territory, which should sound alarm bells,” they added. Investors also kept close tabs on the potential roll-out of Johnson & Johnson’s COVID-19 vaccine in top platinum producer South Africa.

Spot palladium slipped 0.1% to $2,385.00 an ounce, having earlier hit a one-month high of $2,424.26.

Spot gold edged 0.2% lower to $1,815.80 per ounce pressured by higher benchmark U.S. Treasury yields.

Bullion is considered a hedge against inflation likely spurred by massive stimulus, but higher yields have challenged that status since they increase non-yielding gold’s opportunity cost.

Real rates and inflation expectations in the United States will remain a key driver for gold. Inflation expectations could pick up again with rising oil and commodity prices, potentially supporting gold, UBS’ Staunovo said.

U.S. gold futures fell 0.4% to $1,815.70 per ounce, while silver was steady at $27.59.

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