By Steve Levine

All That Glitters is Not Gold

Gold is nice, but nothing says "I love you" like platinum. That’s not some Valentine’s Day pitch from a jeweler. While last year’s rally in metal seems to have petered out, prospects for platinum, along with palladium, remain bright. Used mainly in catalytic converters that curb the smog emissions of vehicles, platinum and palladium chalked up price increases of 56% and 117%, respectively, in the 12 months ended Nov. 30. Analysts believe prices could go higher still this year, thanks to the Jan. 8 launch of two U.S. exchange-traded funds that make direct purchases of these metals, thereby influencing their price. The funds booked $486 million in investments in three weeks of operation. "The potential growth is huge," said Suki Cooper, an analyst with Barclays Capital.

The upside in other precious metals may be more limited this year. Gold and silver rose 24% and 50%, respectively, over the 12 months ended Nov. 30 as investors sought refuge from the global economic crisis. But prices have since retreated as the dollar strengthened.

This year’s losers are likely to be socalled base metals. Copper and zinc, for instance, were up 139% and 112% in 2009 on expectations that stimulus spending would spur demand for industrial raw materials. But prices reversed course in January as governments moved to curb spending. Forecasts for these metals are all over the map. There is consensus on one point, though: The strength and speed of the recovery—particularly in places like China and Brazil—will be the main driver of prices this year.

Data: World Bureau of Metal Statistics, Johnson Matthey, Bloomberg