Monex Precious Metals

1-800-444-8317

Thomson Reuters GFMS Palladium Outlook for Next Three Months:

Date of Release: 4th May 2012

IMPORTANT NOTE: The following is for informational purposes only and was developed by Thomson Reuters GFMS. It does not take into account the investment objectives, financial situation or particular needs of any particular person. Information is from sources believed to be reliable, but is not guaranteed as to its accuracy or completeness. Opinions and estimates are the judgment of Thomson Reuters GFMS and are subject to change without notice. Distribution of this information does not constitute agreement with, or an endorsement of, the views expressed. Obviously, future outcomes are impossible to predict with certainty. Investors should obtain advice based on their own individual circumstances and understand the risks before making any investment decisions.

Palladium performed relatively better than platinum in april, posting an intra-month gain of 4% compared to a loss of 4% for its sister metal. indeed, its discount to platinum narrowed to $930, compared to the gap of over $970 seen in March. Palladium opened the month in similar fashion to platinum, however, sliding from $656 to $635 (which proved to be the month’s low), dragged down by gold’s slide. Thereafter, however, it shook itself free from platinum’s bearish influence and proceeded to recover, comparatively unmoved by the fresh worries in the eurozone (regarding news that spain had failed to reduce its budget deficit and poor auto sales data) that badly affected platinum. Palladium then tracked steadily upwards to close at $679, the month’s high.

Underpinning palladium’s comparatively robust result were several factors. first, news of improving auto demand (most notably in the united states, where March sales rose by 13% and reached the highest quarterly level since 2008) benefited palladium over platinum, given the former’s broader demand base and relative lack of dependence on the eurozone. second, palladium’s underlying gross deficit has garnered positive investor interest. This, combined with the widely held view that russian stock sales are drawing to a close, provided further support.

Looking ahead, these latter factors will remain in play and continue to provide support to palladium. Global auto sales, meanwhile, also seem to be improving; General Motors has recently posted strong first quarter results, thanks mainly to improved us and chinese sales. in addition, speculative net longs have fallen to low levels, leaving ample room for growth. These, combined with gold’s expected rise are expected to result in a broadly upwards trajectory for palladium over the next three months. This is, however, likely to be muted by a number of negative factors, centred on prospects for economic growth. Palladium may find itself vulnerable should global auto sales take a bearish turn, given that over 60% of its total offtake is concentrated in autocatalyst demand. it may also suffer in case of another eurozone shock, dragged down by platinum. its use in electronics applications would also be hit in the event of slowing growth, not only in europe and the us but also china. furthermore, palladium does not benefit from jewellery demand in the event of price dips (as does platinum), leaving it open to greater downside risk. it is also worth noting that palladium remained below its 200 day moving average for almost all of april, only breaking free at a marginal level on the last day of the month. as a result, we expect upside to be capped below $730 and we may see lows of $600.

Additional Information

• Key Palladium Market Developments
• Palladium Market News