DJ NY Precious Metals Review: Platinum, Palladium Surge
DOW JONES NEWSWIRES
Fund buying helped take platinum and palladium futures to fresh
life-of-contract highs in New York Friday. Much of the move was described as
technical in nature, but expectations for strong auto catalyst demand continued
to play a role, as well as currency factors resulting in less expansion of
mining activity in South Africa than some had forecast, analysts said.
The Platinum Group Metals posted sharp gains on a day when gold and silver
upticked modestly.
January platinum settled up $6.40 to $971.90 an ounce, hitting a contract
high of $974. A monthly spot continuation chart shows the metal climbed to its
most muscular level since 1980, when it got as high as $1,045.
December palladium gained $7.10 to $250.05 and peaked at a contract high of
$251.80. Palladium hit its strongest level since June 2004.
A couple of traders attributed the continued gains largely to fund buying.
"Most of the action in the precious (metals) seems to be in the PGMs," said
one. "It appears to be technically fund-oriented."
Dan Vaught, futures analyst with A.G. Edwards, commented that the Platinum
Group Metals at the moment appear to have the strongest fundamental backdrop of
any of the precious metals.
Platinum has had a supply/demand deficit for the last six years, he
explained. And, he continued, there are growing ideas that the market may
remain in deficit in 2006.
"Demand is a big part of it," he said. A number of traders lately have been
citing expectations auto catalyst demand will be strong, particularly in
diesel-powered vehicles in Europe. Furthermore, said Vaught, demand in China is
expected to be strong as the country becomes more conscious of a growing
air-pollution problem.
"There is the idea you're going to see them doing more to require automobiles
to have pollution-control technology, which to a large extent requires a
catalytic converter," he said. "Obviously, there is huge demand potential
there."
Meanwhile, Vaught continued, expectations that South African mining would
expand aggressively has been curtailed by strength in the South African rand in
the last few years.
"They're getting paid for their production of precious metals in dollar
terms, but all of their costs are in rand," he said. "So they were having their
margins squeezed. As a consequence, they have not been able to expand as
quickly as a lot of folks had expected."
Some of palladium's strength is connected to ideas that there will be some
switching from platinum to palladium in catalytic converters, related Vaught.
Otherwise, palladium has been in a supply/demand surplus in recent years.
Meanwhile, December gold added $1.70 to $469.40, while December silver gained
5.5 cents to $7.76.
A trader and Vaught both commented that strength in some of the industrial
metals contributed to gains in gold. Besides the sharp gains in platinum and
palladium, Comex copper moved to record highs. Otherwise, pointed out the
trader, crude oil was softer, which tends to hurt gold.
"There is spillover strength from other metals," said Vaught. "We have not
seen that much else today that might be construed as bullish for gold. You are
seeing the dollar slip a bit, which would be offering some support."
As gold was closing, the euro was up slightly to $1.1703 from $1.1686 late
Thursday. December crude was around 45 cents a barrel weaker.
The trader commented that gold and silver have largely divorced themselves
from the currency market lately. Gold was on an upward path early in the week
even though the dollar was hitting its strongest levels against the euro in
roughly two years.
"We had a nice gold rally after it looked pretty weak (late last week)," he
said. "It bounced nicely and has been holding around here. We're looking to see
where the next move is."
Some short covering may have helped gold ahead of the weekend, added Vaught.
Also, he said, some buying may have been encouraged by worries about more
rioting in France or terrorist attacks in the Middle East.
"Silver has moved with the rest of them," said Vaught. "But you have seen
some strength there recently based on ideas that the long-term supply deficit
is beginning to bite. But realistically, it's hard to see silver sustain any
upward move without the cooperation of the gold pit."
Settlements (open-outcry trading only):
London PM Gold Fix: $466.75 Versus $467 Thursday
U.S. spot gold at 1:50 p.m. ET: $468.70, up $2.45 from previous day; Range:
$465-$469.15
December gold (RGCZ05) $469.40, up $1.70; Range $466.60-$470
December silver (RSIZ05) $7.76, up 5.5 cents; Range $7.685-$7.77
January platinum (RPLF06) $971.90, up $6.40; Range $960-$974
December palladium (RPAZ05) $250.05, up $7.10; Range $241-$251.80
-By Allen Sykora, Dow Jones Newswires; 541-318-8765;
allen.sykora@dowjones.com
(END) Dow Jones Newswires
11-11-05 1408ET
Copyright (c) 2005 Dow Jones & Company, Inc.
DJ info: 82333
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FSN2333 CFMOT COMMENTS METALS
2005-11-11 19:08:32 UTC
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