Why are palladium prices strong?
*The Wall Street Journal, by Matt Day, December 27, 2012
”Palladium futures climbed to a nine-month high as investors bet Thursday that limited supply from the world’s top two producers and steady demand from the global auto sector would mean higher prices in 2013.
The most actively traded palladium contract, for March delivery, rose $16.10, or 2.3%, to settle at $708.50 a troy ounce on the New York Mercantile Exchange. That is the highest settlement price since mid-March.
South Africa’s precious-metals industry is expected to struggle to increase production next year amid escalating labor and other costs that make some mines unprofitable, according to precious-metals refiner and specialty-chemicals company Johnson Matthey, supplies from Russia, the top producer, are expected to fall because of lower production and slowing shipments from state stockpiles.
Demand, on the other hand, is expected to grow, due to stringent vehicle-emissions control standards and healthy auto markets in the U.S. and China. About two-thirds of palladium is used in autocatalysts, which scrub emissions from automobiles.
BNP Paribas estimated palladium demand would exceed supply by 27 metric tons in 2013, compared with 22 tons of excess demand in 2012. With that in mind, money managers are showing ‘pretty significant interest’ in palladium, an East Coast trader of the metal said.
Gold has fallen 3% this month on worries that if the U.S. allows tax breaks to lapse and automatic spending cuts to kick in early next year, the U.S. would slump into a recession. Some investors with winning bets on gold have opted to take their profits before a possible rise on investment income-tax in 2013.”
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