Platinum group metals set to outshine gold

By Jan Harvey

LONDON (Reuters) - Platinum group metals are set to further outstrip gains in gold this year as expectations for a rise in car demand and concern over the supply outlook point to a tighter market balance for the autocatalyst materials.

Palladium has made particularly stellar gains -- up 75 percent so far this year against platinum's 48 percent and gold's 20 percent -- amid weak Russian supply and a relatively stronger outlook for U.S. than European car sales.

Prices of fellow platinum group metal rhodium have also risen 70 percent this year.

Hope for a sustained global economic recovery are placing the metals on a surer footing, should it materialise, analysts say.

"With industrial precious metals denominated in dollars, you cover all three bases -- you can have an inflation hedge, a dollar risk (hedge) and you can get the benefit of recovering economic activity boosting prices as well," said David Wilson, an analyst at Societe Generale.

Deutsche Bank expects platinum prices to average $1,394 (853 pounds) in 2010, and sees palladium at an average $321, while JPMorgan sees platinum at $1,338 in 2010 and palladium at $306, up from a forecast $250 for 2009.

Even though gold prices have hit historic highs, with a promising trajectory for next year, investors are starting to look more favourably at platinum.

"Looking at the two relative to each other, I would say over the next year, platinum has a better outlook than gold," said Nicholas Koutsoftas, a portfolio manager at GE Asset Management.