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Pushing above $1,300, platinum prices leading the way in precious metals sector - SocGen

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(Kitco News) - The platinum market continues to generate new investor attention as prices trade at their highest level in 7-years, pushing above $1,300 an ounce.

Concerns that South Africa could see further supply disruption due to the nation's ongoing issues with vaccines are behind the latest bullish momentum in the price, according to commodity analysts at Societe Generale, who highlighted the precious metal in their latest research report.

Last week Kitco News reported that South Africa continues to deal with problems with its vaccine rollout. South African government said that it would not administer the Oxford-AstraZeneca vaccine after a small clinical trial suggested that it isn't effective in preventing mild to moderate illness from the variant dominant in the country.

This threat of a supply-crunch is creating strong bullish sentiment in the marketplace not see in years, according to SocGen analysts. The French bank noted that the latest trade data from the Commodity Futures Trading Commission showed speculative inflows totaling $423 million, the most significant inflows since September 2019.

"The number of long contracts reached its highest level since February 2020, just before the precious metal sector saw large outflows due to the COVID-induced' dash-for-cash,'" the analysts said in their report. "Concerns are mounting about a potential tight market as South African miners had to shut down several times in 2020 and this could reoccur due to the local variant strain," the analysts said in their report.

Not only is platinum prices pushing higher on supply uncertainty, but SocGen noted that growing demand is providing firm support for prices. Evolving technology surrounding hydrogen energy production is providing long-term support among platinum investors, they said.

While platinum continues to see the strongest bullish sentiment among the precious metal, SocGen analysts noted that the data shows new money flowing into the sector.

"The platinum construction ratio is at 9.8%, the largest amongst all commodities, meaning that for every ten contracts exchanged during the week to 9 February, almost 1 (0.98) was a new open interest. This high construction ratio points to strong market conviction," the analysts said.

Although there is firm bullish conviction in platinum, the analysts also warned that the precious metal could be overbought and at risk of correction as some investors take profits. 

Since the start of the month, platinum prices have risen 19.5%.

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