PGMs tied to gold, but industrial challenges loom: MF Global
Washington (Platts)--2Aug2011/534 pm EDT/2134 GMT
As long as gold prices continue to the upside, platinum and palladium
prices will be well supported, despite an expected slowdown in automobile
demand, analysts with UK commodities brokerage MF Global said in a report
Though platinum gained about $100/oz during July, ending the month at
about $1,790/oz, the metal's upside potential has been limited by a sizeable
surplus, which is likely to remain despite a 10% increase in Chinese demand
for platinum jewelry in the second quarter, MF Global analysts said in its
monthly commodities review.
Moreover, a significant slowdown in global car sales should more than
offset the increased jewelry demand, analysts said.
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"Having said this, as long as gold is well bid, it is difficult to see
any of the precious metals, including platinum, from selling off
substantially," MF Global analysts said.
Even so, a tipping of the global economy back into recession could
decouple platinum from gold. Platinum and palladium have numerous industrial
applications, but are mainly used in the production of automobile catalytic
MF Global analysts expect platinum to trade between $1,730 and $1,830
for most of August.
Turning to palladium, MF Global analysts noted that the metal tested
multi-month highs in July, benefiting from the flight to safety into precious
metals on lingering debt concerns. Palladium ended July around $836/oz, an
increase of 11.5% from the previous month.
But the surge in prices contrasts somewhat with palladium's more
negative fundamentals. UK-based PGM refiner Johnson Matthey forecasts that
palladium and platinum industrial demand will shrink due to increasingly poor
"Chart-wise, should prices manage to break $830 and pull away from it
decisively, we could set the stage for a retest of the record high of $860,"
MF Global analysts said.
"However, we likely will not be getting there this month, and suspect
that prices will instead retrace back into the trading range, likely drifting
to $770 at some point in the month."
--Nick Jonson, firstname.lastname@example.org