Platinum's Price Premium to Palladium at 13-Year Low on Diesel Concern

October 1, 2015

Frankfurt (Oct 1)  Platinum’s premium over palladium is at the lowest in 13 years on concern that the Volkswagen AG emissions scandal will turn car buyers toward gasoline vehicles.

Platinum, mainly used in devices that curb harmful gases from cars and particularly in diesel types, costs about $233 an ounce more than palladium, the least since 2002. Platinum prices have slumped 7.4 percent since mid-September, when the German carmaker admitted to attempts to rig U.S. pollution tests for diesel models. Palladium, used mostly in gasoline vehicles, has gained 11 percent in the period.

“The reaction in the financial markets is clear that diesel cars will be less in demand in future and gasoline cars will be more in demand,” Georgette Boele, a strategist at ABN Amro Bank NV in Amsterdam, said by phone on Wednesday. “That is why that spread between platinum and palladium has moved as much.”

Platinum futures for January delivery gained 0.3 percent to $911.90 an ounce at 11:11 a.m. on the New York Mercantile Exchange, and earlier this week touched the lowest since 2008. The metal has slumped 29 percent in the past year as slower economic growth cut demand and supply increased after South African mine strikes ended last year.

Palladium futures for December delivery rose 3.8 percent to $675.70 an ounce, after touching $682.55, the highest since July 7.

Producers Rally

Shares in world’s largest platinum producers advanced. Anglo American Platinum Ltd., the biggest, climbed as much as 9.1 percent in Johannesburg. Impala Platinum Holdings Ltd., ranked second, gained as much as 4.6 percent while Lonmin Plc surged as much as 20 percent in London.

Gold futures for December delivery fell 0.1 percent to $1,114.10 an ounce on the Comex in New York. A U.S. jobs report Friday may provide evidence to Federal Reserve policy makers that the economy can withstand an increase in interest rates this year. Higher borrowing costs curb the appeal of bullion, which doesn’t pay interest or give returns like other assets such as bonds and equities.

“The inevitable rate hike is bound to add downward pressure on gold,” Howie Lee, an analyst at Phillip Futures Pte in Singapore, said in a note. “But the Fed’s accommodative monetary policy means the downward move may not be as huge as we think.”

Source: Bloomberg

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