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To: LoneClone who wrote (37484)	5/21/2009 9:41:46 PM
From: LoneClone	Read Replies (1) \| Respond to of 193988

Stable palladium keeps distance from platinum Reuters \| Wed, 20 May 2009 14:19 miningmx.com [miningmx.com] -- PALLADIUM may continue to outperform its sister metal platinum, despite being equally exposed to the ailing auto sector, thanks to its niche use in industrial sectors and more stable investor interest. While analysts say platinum is more likely to be lumped into the same investment pool as gold thanks to its investor appeal and use in jewellery, palladium's multiple industrial uses tie its fate more closely to base metals such as copper, and the recovery of the world economy by extension. "Platinum is a hot metal directly hit by issues such as the fate of General Motors, while palladium is behaving like a base metal and keeping a distance from auto problems," said Yukuji Sonoda, a precious metals analyst at Daiichi Commodities. Over the years, the two have typically been highly correlated at more than 90 percent for the past two years, with 60 percent of their demand attached to making auto catalysts, a sector caught in the grip of the worst recession in generations. They are also typically produced from the same mines. They can deviate sharply as last November, when the correlation turned briefly negative as palladium shot higher, but typically quickly returned to dance in lockstep. More recently, they have begun to diverge again, with the 30-day correlation falling to 70 percent as palladium gained nearly 9 percent over the past three months, outperforming platinum's 5 percent gain and the 7 percent slide in gold. Palladium has also risen steadily from around $180 per ounce in January to a 2009 high around $240, aided in large part by expectations for economic recovery in China that also drove base metals such as copper, zinc and lead steadily higher. It hit $588 in early 2008, just half the record high of 2001. Platinum has fallen from this year's mid-April peak of $1,244 to stand at $1,135. The difference, say analysts, lies in the marginal but important uses of palladium in things like palladium-containing multi-layer ceramic capacitors for the electronics industry and palladium catalysts used to produce purified terephtalic acid. "There are real demand flows in palladium while platinum remains sluggish," said Naomi Suzuki, a senior analyst at SC Asset Management Co. SPECS VS INVESTORS Analysts say movements in exchange-traded commodities also suggest palladium may move independently of platinum. Holdings of ETF Securities' palladium-backed ETC inched up in the week to May 15 while platinum-backed ETC continued its slide in the same week. A recent report by Standard Bank showed ETF allocations in palladium had mostly stayed near 250,000 ounces over the past year while those in platinum swung from a high near 450,000 ounces to a low near 150,000 ounces in the same period. "Palladium's relative firmness and stability stand out," said Shuji Sugata, a manager at Mitsubishi Corp Futures & Securities. Compared with the platinum market, buying and selling of palladium were not so closely related to movements in the metal's prices, suggesting that investors may be acquiring it for longer-term returns, Johnson Matthey said in this week's report. "Physical investment demand for palladium is forecast to remain strong in 2009," it said. If investors were holding this metal for longer-term profits, "they may view the current price of palladium as a buying opportunity and drive demand higher". SUPPLY FLUSH Analysts say while palladium, like many other metals, is likely to have hit a bottom, it is still in oversupply, and unlike last year when strong demand made the metal a cheaper and attractive alternative to platinum, the current economic downturn has ruled out that option. And for now, the problems that beset major producer South Africa a year ago have eased, brightening the supply outlook. "Ample supply will keep a cap on prices," said Osamu Ikeda, general manager at Tanaka Kikinzoku Kogyo. Ultimately, until automakers begin increasing production, any broad-based recovery looks a long away off. "A real recovery in palladium demand hinges on a recovery in the auto sector. Fresh demand for the metal will only occur when makers launch new models," Ikeda said.