Gold or Platinum—Which Will Get to $2,000 First?
Gold and platinum have been locked in a tight race for the past month, with both trading currently around $1,680 an ounce, prompting the question – which precious metal will win the race to $2,000?
Analysts told CNBC that platinum, which is used as an industrial raw material and in making jewelry, has the edge over safe-haven gold.
Production disruptions coupled with a pick-up in global auto production will drive platinum, widely used in catalytic converters for vehicles, to the key level before gold, said analysts.
Closure of mines in South Africa, the biggest producer of the metal has led to supply constraints. Rising labor and electricity costs have squeezed the margins of producers, resulting in the termination of operations at several mines.
Earlier this month, Anglo American Platinum, the largest producer of the metal, announced it would be halting operations at four mine shafts in the Rustenburg region of South Africa, cutting annual production by 400,000 ounces – or around 7 percent of global output. Following the report, platinum rose as high as $1,704 an ounce, however, it has since fallen to $1,674.
"I'm bullish on platinum – I think it will have no problem getting into the upper $1,900s and $2,000s as will gold, but I think platinum will reach there first," Sean Hyman, editor of the Ultimate Wealth Report, a monthly publication on market trends, told CNBC, citing supply constraints.
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Hyman sees platinum rising to $2,000 an ounce – around 20 percent higher from current levels - in the next 6 to 9 months. The metal last hit that level in July 2008.
Eugen Weinber, head of commodities research, Commerzbank who agrees platinum will win the race to $2,000, said, production disruption in South Africa is not completely priced in, adding that he expects to see further mine closures going forward.
Demand from Auto Sector
As auto production picks up alongside the recovery in global growth, demand for platinum will increase as well, both strategists said, supporting the price of the metal.
"The global economy is recovering and especially as China's economy is beginning to improve, we'll see more demand for cars, which will increase the demand for these metals (platinum) even more," Hyman said.
The pickup in auto sales in the world's second largest market, the U.S., is expected to continue this year. New vehicle registrations are forecast to increase by 900,000 to 15.3 million in 2013, according to auto research firm Polk.
Strategists at Capital Economics, however, disagree that platinum prices will sustain gains above $1,700, citing weakness in demand out of Europe – the second largest market for the metal – due to the region's tepid growth.
They added that if platinum does sustain around $1,700, it will prevent further significant production cuts this year, thus limiting further price gains.
For gold, on the other hand, Weinber believes the increase in the price of the precious metal has been "postponed" but not "abandoned."
Gold has struggled to break above the key $1,800 resistance level over the past one year, coming only close at $1,794 in October.
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"Right now, demand for safe havens is not quite there, and inflation isn't a great danger," Weinber said, adding that speculative interest in the precious metal has waned as well.
However, as inflationary pressures become more visible in the second-half, it will lend support to gold prices, which could hit $2,000 at some point in the fourth quarter or early 2014, he said.