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Platinum and Palladium Weighed by Mounting Growth Risksby Peter A. Grant
Oct 10, AM According to the International Platinum Group Metals Association, a quarter of all goods manufactured today either contain platinum group metals (PGMs), or the PGMs play a significant role in their manufacturing process. It is therefore not surprising that indications of a broad economic slowdown would create an expectation of softer demand for the white industrial metals. Palladium set 6-month highs in September on the back of robust auto demand and supply concerns centered on South African labor unrest. While there has been a little ebb and flow in the labor situation in recent weeks, it is far from resolved. In fact, some mass mining industry layoffs associated with wildcat strikes suggest things may be heating up again on that front. So while there may be renewed demand concerns in the PGMs, they are being offset — at least to some degree — by persistent supply worries. About 40% of global palladium supply comes from South Africa, second only to Russia at 44%. By comparison, 80% of platinum supply comes from South Africa. In that context, it makes sense that the latter was the better performer during the recent rally; and has been more resilient in the current corrective phase. Platinum did mount the expected challenge of the little $1733.00/$1733.50 double top from February (see 12-Sep commentary), reaching an 8-month high of $1728.50 on Friday last week. Palladium gains stalled at $703.60, leaving the corresponding February highs at $722.70/$724.10 well protected. Palladium has been unable to sustain probes above the 100-week moving average, while platinum is holding gains above the 100-week MA. Of the white metals (including silver), I think platinum remains the most constructive from both technical and fundamental perspectives. However, rising growth risks, along with ongoing concerns over the eurozone debt crisis and US fiscal cliff, make it likely that gold will outperform the white metals over the near to medium term. Global central banks will be forced to continue pushing-back against these risks via their campaigns of super-accommodative monetary policy and currency debasement for the foreseeable future, making a monetary metal like gold increasingly appealing. Peter Grant is USAGOLD's resident economist and a well-known analyst globally in the forex and precious metals markets. NEWSLETTER SIGN-UP Opinions expressed in commentary on the USAGOLD.com website do not constitute an offer to buy or sell, or the solicitation of an offer to buy or sell any precious metals product, nor should they be viewed in any way as investment advice or advice to buy, sell or hold. USAGOLD, Inc. recommends the purchase of physical precious metals for asset preservation purposes, not speculation. Utilization of these opinions for speculative purposes is neither suggested nor advised. Commentary is strictly for educational purposes, and as such USAGOLD does not warrant or guarantee the accuracy, timeliness or completeness of the information found here.
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