Traders waiting for answer to auto industry bailout

By Leia Michele Toovey- Exclusive to Palladium Investing News

Spot palladium rebounded on Monday, up more than 5 per cent from New York’s notional close of $168.00.

Palladium hit $176.50 per ounce as technical buying emerged after demand worries stemming from an ambiguous auto industry vote hit platinum group metals on Friday. Platinum and palladium traders are still awaiting the outcome of a new vote; anticipated to come through on Wednesday.

Car makers account for more than half the global consumption of platinum and palladium. Until more definite news on the bailout package emerges, the metals are likely to remain in the same range. Analysts are keen to point out that even if a bailout is passed, it won’t necessarily translate to improved PGM prices.  Low prices are a reflection of waning demand, and the auto bailout will do little to address this underlying issue.  

Russia is hoping to push forward its jewellery business by offering consumers new products.  The jewellery business in the region is facing tough times, but many believe that in this rough patch is the opportunity to innovate.  Russia remains one of the largest and fastest-growing high-end jewellery markets in the world, however, the global economic climate has take a toll on recent sales numbers. The polishing industry is down, the jewellery industry is down, and, as a result of this the retail industry is down. Russia’s Norilsk Nickel, the world’s leading nickel producer, is promoting palladium as a new precious metal for jewellery. Palladium is a member of the Platinum Group Metals, and has characteristics similar to its cousin platinum. Palladium is ten times rarer than gold and due to its relatively small market is cheaper. Though not yet popular globally, the palladium jewellery market has already seen significant growth in China.

Beginning Friday, December 19, Exchange Traded Commodities (ETCs) group ETF Securities Ltd will offer a range of precious metals securities on the Australian Securities Exchange. The four new metals securities to be quoted are ETFS Physical Platinum, ETFS Physical Palladium, ETFS Physical Silver, and ETFS Physical PM Basket which will consist of platinum, palladium, silver and gold. This move marks the first time that palladium has been made available to Australian investors through ordinary brokerage accounts. ETCs offer investors a simple, cost-efficient and secure way to access the precious metals market, investors are provided with a return equivalent to movements in their spot price less an annual management fee.

AA recent report by Johnson Matthey shows that investors in platinum and palladium exchange traded funds (ETFs) have proved to be two fundamentally different groups of people.  Platinum fund investors hold their investments for a short term and palladium fund investors take a longer-term view. Investors in platinum ETFs were more likely to treat the funds as platinum equity and sold their platinum ETF holdings when the price fell in the third quarter of 2008; this contrasted with palladium investors who held their investments through the period of downturn in the price and appeared to be holding on for the long term. Palladium ETFs are now considered an important demand sector for this metal. Net annual demand is expected to rise to 430,000 ounces in 2008 compared to 280,000 ounces bought through palladium ETFs in 2007.

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