Palladium, platinum rally after report

2012-11-14 09:27

New York - Platinum group metals (PGM) rose sharply on Tuesday after a bullish forecast that production outages earlier this year could create a supply deficit, while gold traded flat as investors awaited more clarifications on Greek aid by the euro zone.

Palladium rose over 4.5% for its biggest one-day gain in almost a year, after PGM specialist and refiner Johnson Matthey said it expects palladium to record its biggest deficit since 2000 this year as mine supply and sales of Russian state stocks dwindle and auto demand climbs.

Traders cited the closely watched report for PGM's gains.

Johnson Matthey also expects the platinum market to turn to a deficit in 2012 from last year's surplus on lingering supply fears in South Africa, which accounts for 70% of the world's supply.

"I saw active traders come in to the gold/platinum spread. They were buying two April platinum contracts and selling one April gold, thinking the spread will start to narrow again," said Phillip Streible, a senior commodities broker at futures brokerage RJ O'Brien.   

The spread between gold and platinum is currently at $150 after it rose to a record $230 in August this year. The fact that the price of gold is trading above that of platinum is considered by most analysts as unusual as platinum is much more rare than gold.

Palladium rose 4.6% to $633 an ounce by 21:29 on Tuesday night, while platinum was up 1.4% at $1 581.99 an ounce.

Months of unrest in the South African mining sector have hit platinum production, which in turn slowed palladium and other PGM's output. Investors remain wary about platinum supplies after the most damaging strikes since the end of apartheid.

South African production is expected to fall more than 12% this year to 4.25 million ounces, its lowest since 2001.

Barclays strategists said in a note that the scope for further reduction appeared limited given the extent of the production losses and the pick-up in prices, but expectations for demand from Europe remained disappointing.

Greece, euro zone eyed

Gold held steady after Monday's drop, as the markets focused on a public clash between Greece's international lenders over how Athens can bring its debts down to a sustainable level.

New developments on Greek aid could reignite fears that Europe's troubles could flare up anew, potentially boosting safe-haven buying in gold, analysts said.

Spot gold eased 0.1% to $1 725.94 an ounce.