Japanese investors moving from gold to 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," said Osamu Ikeda, a general manager at Japan's largest bullion house, Tanaka Kikinzoku Kogyo.

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," said Osamu Hoshi, deputy general manager at Mitsubishi UFJ Trust.

The assets of Mitsubishi's physical platinum exchange traded fund (ETF), Japan's first backed by metal stored in the country, had grown by 38 percent since the end of July to 1.62 billion yen ($21 million) as of Aug. 24.

"Buying momentum began early in July but there has been constant buying since late that month, accompanied by rising trading volumes," said Mitsubishi's Hoshi.

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 this month, Hoshi said.

"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 our ETFs are growing may indicate more Japanese investors are shifting away from physical investment in precious metals."

Tanaka Kikinzoku said it had sold 1,185 kg of platinum for investment purposes as of Aug. 22, up from 666 kg in July, and a nearly three-fold increase from 408 kg in August 2010.

NARROW SPREAD

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 $1,900 an ounce this week.

But spot gold plunged about 9 percent in just two days after hitting its historic peak.

On the Tokyo Commodity Exchange, the lead platinum futures contract for June 2012 delivery JPLc6 has risen as much as 6 percent this month, much milder than a 17 percent jump for the lead gold futures contract for June 2012 delivery JAUc6.

The spread on TOCOM between gold and platinum, which is usually priced higher than gold, narrowed this month and fell into negative territory for one day in early August.

Other market participants noted 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.