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(Kitco News) - For the first time since March, platinum prices are higher than gold prices, as concerns about mine supply falling come at a time when industrial demand for the white metal is increasing.

At 11:20 a.m. EST, the most-active April platinum futures contract on the New York Mercantile Exchange was trading at $1,690 an ounce, up $31.80, while the most-active February gold contract on the Comex division of the Nymex was up $12.80 an ounce, at $1,682.20. For the year, platinum has gained about 10%.

Platinum prices have rallied sharply this year to narrow their discount to gold. Platinum prices finally overtook gold prices on Tuesday after news that the world’s top platinum producer, Anglo American Platinum (ticker: AAL), known as Amplats, said it will close four South African mines, affecting up to 14,000 jobs, which is 24% of its workforce, according to media reports.

Mothballing the shafts will cut platinum production by 400,000 ounces annually, to about 2.1 million to 2.3 million ounces, news stories said.

The review of Amplats business operations was expected, and the market was bracing for about 250,000 ounces in production losses, so the 400,000 was more than most market watchers were expecting.

The drop in output comes on the heels of expectations that global platinum production as a whole is in a deficit. In November, Johnson Matthey said in its widely followed Platinum Interim Review that the white metal swung to a supply deficit of 400,000 ounces in 2012, versus a 430,000 ounce surplus in 2011.

The news of tighter supply comes as analysts forecast a rebound in automotive sales, which is expected in 2013 as the global economy is expected to rise. Research firm IHS projects U.S. light-vehicle sales will rise to 14.9 million units in 2013 from an expected 14.3 million in 2012. Chinese sales are projected to hit 20.5 million in 2013 after 18.8 million this year.

Platinum’s greatest use is in autocatalysts, so the one-two punch of tight supplies and higher demand underpins a strong fundamental outlook for the white metal.

The Amplats news has some market watchers edgy because it was just last year that strikes in South Africa, much of it focused in the platinum-producing region of Rustenburg, caused production losses and pushed prices higher.  Amplats said Monday that it would post a loss for 2012 because of the walkouts, which cut output by 306,000 ounces. The company also said it plans to offset the mine-job cuts by creating the same number of jobs focused on housing and small business development in areas, including Rustenburg.

Howard Wen, precious metals analyst at HSBC, said equity analysts at the firm said the reaction from the South African mining unions will be critical. “If there is another strike, there will be room to rally further,” Wen said, who added that HSBC is positive on platinum prices for 2013.

Jewelry Demand May Take A Hit

Historically platinum prices traded at a premium to gold, but fell under gold a few years ago as the global economy struggled and investors turned to gold for several reasons, including for its role as an alternative currency.

At its nadir, platinum held a $222.50 per ounce discount to gold in mid-August. Platinum’s relative cheapness to gold caused jewelry demand for platinum to increase, but now that might change, said Commerzbank.

“This could see jewelry demand switching away from platinum and back to gold again. That said, we do not believe that this will weigh on the price of platinum given that demand from the automotive industry is relatively robust at present,” they said.

Platinum rallied strongly in the first two weeks of 2013 on bullish fundamental reasons, and overall platinum could see strong gains this year. Still, market watchers said, the metal experience some profit-taking in the short term kick in before rising further.

Rob Kurzatkowski, senior commodity analyst at optionsXpress, said prices could pause as the market is in overbought territory, as measured by the relative strength index, a technical chart indicator.

Kurzatkowski said the next test for April platinum futures is the $1,730 level, which he calls a significant resistance level. A move above could allow platinum to test the 2011 highs near $1,875. Failure to break through $1,730 could cause the market to retreat, he added.

Part of what has helped platinum’s move over gold is the yellow metal’s lackluster price action. Gold’s action is not likely to change anytime soon, said Kevin Grady, owner, Phoenix Futures and Options. “Gold is really stuck in a range. I don’t see anything substantial out there to cause it to rally,” he said.

Grady also said considering platinum spiked higher on a news-driven event, this premium over gold may not last, or at the very least may narrow.

“As soon as it’s over, platinum prices can reverse very quickly,” he said.

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By Debbie Carlson of Kitco News dcarlson@kitco.com

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