Global Macro: Improving Economy Increases Platinum Demand

NEW YORK (TheStreet) -- Platinum prices may be forming a bottom as the global economic recovery increases demand for the metal. Prices remain low but show potential to take off in the new year.

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Platinum, which is used in industrial settings to reduce pollution, is currently running its largest demand deficit since 2009. The gap between demand and supply has widened as economies across the world begin seeing growth accelerate.

Unlike other precious metals, such as gold, platinum prices are helped by stronger economies. Speculators have begun to notice the deficit, which could attract buyers.

Prices for platinum have been on a downward trajectory, and are at their lowest point in four years. As 2013 began, platinum was at $1556 per ounce. It is currently at $1336 per ounce.

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The Federal Reserve stimulus taper announcement last week looked negative for metals, but it also signaled the central bank's growing belief in the recovery. Inflation remains low, which has capped the upside move in treasury rates since the taper, but improved commodity demand could drive inflation past its 2% threshold.

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