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Is Palladium losing its shine as auto sales drop?

Current Market Climate

The decline in auto industry sales is having a profound effect on palladium values in the world market. Palladium and platinum are used in catalytic converters and other auto parts: the demand for the precious metals is slackening as a result of higher gas and oil prices. Palladium spot prices now rest at a three-year low ^[2], and the prospects for growth are minimal at present.

Palladium fell 20 cents on the ounce ^[3] in the past 24 hours (Sept. 8 to Sept. 9, 2008), going from 259.00/oz. to its current price, 239.00/oz. This drastic dip represents a continuing downward spiral that shows no signs of abating in the near future.

As long as auto sales continue to stall, precious metals like platinum and palladium will continue to drop: American auto sales are at their lowest point since 1993. A weak US dollar is also impacting palladium values overall. A stronger dollar or any boost to the auto industry could cause a positive surge in palladium values. Currently, the US dollar is gaining momentum, with steady increases over the past week. If such a trend continues (the US dollar is now at $1.4047, the highest recorded price since 2007, versus the Euro), we may see stronger palladium spot prices in the coming days.  

Palladium is showing some optimistic growth as a jewelry material, particularly in China, where it is seen as an alternative to the more expensive precious metal, platinum. Known as "the other white gold", Palladium may have a spot price resurgence as jewelers worldwide turn to this less costly metal to produce their designs.

Key Players In Global Palladium Production

Anglo Platinum (AMS: Johannesburg Stock Exchange) is a leading global producer of palladium: a recent confirmation of mining rights has made their market position stronger. Current stock price rests at a high of $1420.00 ZAR, up from $930.00 ZAR, its lowest recorded price in 2008. This strong performance can be linked to a new deal between Anglo Platinum and Wesizwe Platinum Limited ^[4]: they are joining forces to maximize profits from the Western Bushveld Joint Venture (WBJV).

North American Palladium Ltd. (PDL; TSX) - The full owner of the rich deposits found at Lac-Des-Iles Mine in Thunder Bay, Ontario, North American Palladium Ltd. produces 5 per cent of global palladium resources. They also have other projects in Finland (copper mining) and Shebandowan West (copper, nickel mining) in Canada. TSX stock quotes for this company are currently down .035 percent, and the Sept. 09.08 price is currently 2.82 a share: yesterday's close was 3.17.

A Canadian Contender

Pele Mountain Resources (GEM; TSX) - This company develops the Eco Ridge Mine in Northern Ontario's Elliot Lake. They are now developing a new uranium project that will allow them to mine over 42.5 billion pounds of uranium in an environmentally responsible manner. This project is moving forward rapidly, and Pele Mountain will see the benefits of this new, innovative mining method. According to Pele CEO Al Shefsky ^[5], "Our top-notch technical team is leveraging leading-edge, environmentally-friendly technologies never before deployed in Canadian uranium mining to develop a safe, secure, and reliable operation that, we believe, will deliver significant long term benefits to the region and to our shareholders."  Pele has a diversified mining program: they produce  gold, uranium, diamonds, and base metals. 

For more information on Palladium's potential in jewelry production, please visit our archive and look for the following article: you will be able to read about the full impact of the new demand for palladium in Chinese jewelry manufacturing. Please follow this link for the article ^[6].