HSBC cuts platinum outlook after gold pressures prices

HSBC lowered its platinum price forecasts for this year and next, even though supplies are tight, because the metal has been influenced by a sharp sell-off in gold.

The bank cut its 2013 average price forecast for platinum to $1,580 an ounce from $1,710 and reduced it for 2014 to $1,725 an ounce from $1,800.

Gold prices have fallen 17 per cent so far this year in anticipation of ultra-loose monetary policy, especially in the United States, potentially coming to an end. Platinum prices have dropped 5.6 per cent during the same period.

But HSBC said it expected a growing supply squeeze to be price supportive for platinum.

"Supply (of platinum) has shrunk and is at risk to decline further amid industrial stoppages and continued rationalization among South African producers," HSBC analyst James Steel said in a note on Friday.

"We continue to expect this tight supply picture to drive prices going forward."

Steel said platinum demand had been boosted by stronger industrial consumption for the metal primarily driven by the auto sector in the United States and China.

HSBC kept its 2013 palladium price forecast unchanged at $750 per ounce saying that it is positive regarding likely price appreciation going forward for the industrial precious metal.

The bank raised its 2014 palladium price outlook to $825 per ounce from $800 earlier.

"We expect that persistent supply/demand deficits based largely on dwindling Russian stockpile sales and declining mine output will lend support to palladium prices in the longer term," Steel said.

HSBC expects that the tightening market balances will elicit a positive response from palladium investors.