Palladium at Highest Since 2011 as Gold Near 15-Week Low

May 28, 2014

Johannesburg (May 28)  Palladium rose to the highest since August 2011 as a strike continued in South Africa, the second-biggest producer. Gold was little changed near a 15-week low.

Palladium rose 17 percent this year as miners downed tools since January in South Africa. The country’s new mining minister will meet with the largest platinum companies after they and the main union failed to reach an accord to settle the dispute.

The producers have lost 20 billion rand ($1.9 billion) of revenue to date, the companies said. Platinum- and palladium-backed fund holdings are at a record, as shortages build for a third year and amid tension in Ukraine. European Union leaders put off further sanctions on Russia, the top palladium supplier, after President Vladimir Putin showed a willingness to work with Ukraine’s new leader.

Palladium’s “fundamental outlook is supportive and I think that primarily relates to South Africa,” Ole Hansen, head of commodity strategy at Saxo Bank A/S in Copenhagen, said today by e-mail. “Strong momentum is attracting speculative funds into the metal so we continue to see new buying on each new high.”

Palladium for September delivery gained 0.4 percent to $835 an ounce by 7:54 a.m. on the New York Mercantile Exchange. It touched $845, the highest since Aug. 1, 2011. Futures trading volume was five times the average for the past 100 days for this time of day, data compiled by Bloomberg showed. The metal for immediate delivery rose 0.1 percent to $834.75 in London, according to Bloomberg generic pricing.

Platinum for July delivery was 0.6 percent lower at $1,453.90 an ounce in New York. South Africa is the top producer of the metal.

Metals Shortages

Palladium demand will beat supply by 1.6 million ounces this year and platinum’s shortage will total 1.2 million ounces, both the most ever, according to Johnson Matthey Plc data. The metals are mainly used in pollution-control devices in vehicles.

Gold slid 2 percent yesterday after data showed U.S. durable goods orders unexpectedly rose in April and U.S. equities reached a record. The dollar was little changed after touching a three-month high against the euro yesterday. The metal sank 28 percent last year on expectations the Federal Reserve would cut stimulus as the economy recovers.

Better U.S. data “bolstered the expectation of rebounding economic conditions in the world’s largest economy,” Abhishek Chinchalkar, an analyst at Mumbai-based AnandRathi Commodities Ltd., said in a report. “Other than geopolitical tensions, however, we do not see any other factor that could benefit gold.”

Gold for August delivery was little changed at $1,265.60 an ounce on the Comex in New York. Prices reached $1,261.10 earlier today, the lowest since Feb. 7. It fell 9.1 percent since mid-March, when Russia annexed the Black Sea peninsula of Crimea.

Bullion’s 14-day relative-strength index fell to 32.7 today, approaching the level of 30 that suggests a potential impending rebound to some analysts who study technical charts.

Holdings in gold-backed exchange-traded products were at 1,724.9 metric tons yesterday, 0.5 percent above a 4 1/2-year low set May 22, data compiled by Bloomberg show. Silver for July delivery increased 0.2 percent to $19.10 an ounce.

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