Palladium hits 2-year peak on demand optimism

By Frank Tang

NEW YORK (BestGrowthStock) – Palladium rose to a two-year high above $500 an ounce on Monday, and sister-metal platinum reached its priciest since August 2008 backed by strong investment demand due to an improving auto-sector outlook.

A softer dollar also bolstered equities crude oil and gold, which rose to a near one-month high.

Inflows into the U.S. platinum and palladium exchange traded funds and optimism about the global economic recovery have spurred buying of the underlying platinum group metals, which are used in the auto industry for catalytic converters and also in jewelry.

Platinum was underpinned by worries about rising cash production costs, production interruptions, and a lack of adequate power supply in South Africa, the world’s largest producer of the metal.

“The global auto recovery, the impact of the softer U.S. dollar, and potential supply concerns out of South Africa are driving platinum group metal prices,” said William Rhind, strategic director of ETF Securities Ltd’ U.S. unit.

Spot palladium rose to $500.50 an ounce, its strongest price since March 2008. In late New York trade it was at $500 an ounce, up from $490 late the previous session on Thursday.

New York June palladium futures settled up $16.65 at $508.00 an ounce on Monday.

Palladium and platinum prices began to rally in January after London-based ETF Securities launched the first U.S. platinum and palladium funds, which now hold about 900,000 ounces of the combined metals.

“There is strong investment demand in the U.S. because of the platinum and palladium ETFs, and the recovery in the auto sector, particularly in the very strong developing markets, such as China, has led to a pick-up in demand,” said Carlos Sanchez, precious metals analyst at commodities consultant CPM Group.

U.S. auto sales jumped to a seven-month high in March, led by a 41 percent surge at Toyota Motor Corp (7203.T: ) after the Japanese automaker offered the steepest discounts in its history to win back sales lost during its recent safety crisis.

PLATINUM-GOLD LINK WEAKENS

Gains on Wall Street after optimistic economic data, including pending home sales and U.S. services sector data in March, fueled investment sentiment in the gold market.

Spot gold was at $1,131.40 an ounce, compared with $1,125.50 quoted late in New York on Thursday. Its session high $1,133.20 was the loftiest since March 8.

U.S. June gold futures settled up $7.70 at $1,133.80 an ounce.

The New York market, which was closed on Friday, reopened on Monday after the Easter weekend, while the U.K. and most European markets were shut on Monday for a holiday break.

Platinum started to diverge from gold in January, after showing a strong correlation with gold prices in the last quarter of 2009.

Platinum was at $1,700 an ounce, compared with $1,668.50 late in New York on Thursday. Earlier in the session, it hit $1,703.50, the loftiest since August 2008.

Silver firmed to $18.07 an ounce, up from $17.87 Thursday. It hit a 2-1/2 month high of $18.11 on Monday.

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(Additional reporting by Lewa Pardomuan in Singapore; Editing by Alden Bentley)

Palladium hits 2-year peak on demand optimism