Palladium’s Fundamentals and Technicals Remain Positive

Gold
Gold dipped quickly in early US trading yesterday to $1,108.00/oz before recovering to close down 0.12%. It has range traded from $1,122/oz to $1,126/oz so far in Asian trading this morning. Gold has risen and is currently trading at $1,125.50/oz and in euro and GBP terms, gold is trading at €829/oz and £756/oz respectively.

Sterling has again fallen versus other currencies and particularly against gold as Britain’s sovereign debt profile has deteriorated. Concerns about this , the deteriorating public finances and the prospects of hung parliament or minority government could see gold in sterling terms target the psychological level of £800/oz in the coming months.

Palladium
Palladium’s very strong performance in the recent months continues due to the positive outlook for jewellery, investment and industrial demand. Industrial demand from the global automobile sector and particularly from China and other Asian countries looks set to remain robust for the foreseeable future. This and increasing investment demand has led to concerns about increasing tightness in the palladium market.

China overtook the United States as the world’s largest auto market last year and has continued to be the leading bright spot for the troubled global industry this year due to Beijing’s stimulus steps. China’s passenger car sales in February rose 55 percent from a year earlier, the official industry association said yesterday, as policy incentives continued to lure buyers into showrooms during the holidays. Palladium is used in catalytic converters in traditional vehicles and hybrids. Johnson Matthey have said that gross demand for palladium from China’s auto sector in 2009 was 520,000 oz – an increase of 35% from 2008. Platinum demand for the auto sector was up 16%, to 215,000 oz.

Palladium’s increasing attraction as an investment was seen in comments by Norilsk Nickel (GMKN.MM), the world’s largest palladium producer, at the Reuters Global Mining and Steel Summit. Future jewelry and industrial demand will be strong – "for many people it is an attractive investment opportunity because of very healthy demand," Norilsk Marketing Director Anton Berlin said in response to a question on whether volumes flowing into exchange traded commodity funds would be maintained "Jewelry will be an important part of demand, its industrial use is diverse and sustainable," he said.

Technically palladium is looking very well (see chart above) after its sharp sell off in 2008 when it fell from its recent record (nominal) high of $592.50/oz in March 2008 to $160/oz in late 2008. It has since recovered and was one of the top performing metals in 2008 surging 117%. At $470/oz it remains below its recent record nominal high of $592.50/oz and its record nominal high at over $1,100/oz in January, 2001. It may be overbought in the short term but a close above long term resistance (see chart above) could see us challenge the recent high of two years ago.

Silver
Silver dipped as low as $17.28/oz this morning in Asia. Silver is currently trading at $17.42/oz, €12.82/oz and £11.63/oz.

Platinum Group Metals
Platinum is trading at $1,605/oz and palladium is currently trading at $474/oz. Rhodium is at $2,550/oz.
 

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Mark OByrne

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