Attracted by the narrowing spread between platinum and gold and recent stability displayed by the metal, Japanese investors are investing in physical platinum
Japanese investors have been steadily boosting their platinum investments over the last month, tempted by the precious metal's stability relative to gold as they look to diversify their commodity holdings with global markets in turmoil.
The amount of gold holdings customers want to sell has grown by the day this month, but purchases of platinum have actually doubled. Japanese investors have been bucking the global trend for buying gold, cashing in their holdings as bullion smashed through successive record levels.
I think platinum is being bought as price moves are much milder than gold. Buying momentum began early in July but there has been constant buying since late that month, accompanied by rising trading volumes. The daily average trading volume for Mitsubishi's platinum ETFs exceeded 100 million lots on Aug. 5, and has generally hovered above the average of around 50 million lots for most of August-2011.
While platinum prices are prone to downside risks as they are tied to industrial demand, the metal is more precious in nature than gold and its value is more stable. The fact that ETFs are growing may indicate more Japanese investors are shifting away from physical investment in precious metals.
A downgrade in the U.S. sovereign debt rating and growing worries about its economy, as well as the spreading European debt crisis triggered a rush to buy gold globally, pushing prices to a record high above $1,917.80/oz an ounce during the week [22-27].
But spot gold plunged about 9 percent in just two days after hitting its historic peak.
CHANGE IN OFFING
As observed by the market participants about possible change in tax code, there would probably be a flurry of transactions ahead of a revision to tax laws due to take effect from the start of next year. After the change, those handling the sale of gold and platinum ingots and coins exceeding 2 million yen in value must submit a record of the transaction to tax authorities.
Disclaimer: This is just a research piece and not an investment advice. All financial transactions carry a RISK