PGMs lead the rally in the precious metal complex as global economic recovery spurred optimism on demands. Moreover, Susquehanna Capital Group's purchase of ETF Securities' US platinum and palladium ETFs also boosted prices. Platinum for April delivery extends gain to 1533, the highest level since August 208, in European morning after surging +3.6% Monday. Palladium for March delivery advances to an 18-month high at 427. The benchmark contract gained +3.1% Monday.
ETF Securities said that Susquehanna Capital Group, also the lead market maker bought 100K shares of its first US platinum exchange-traded fund on December 30 and delivery is expected to take place on January 8. At the same time, the Group also purchased 100K shares of the US palladium ETF. In April the London-based ETF Securities filed papers to bring the first platinum and palladium ETFs to the US. On December 22, the SEC approved a proposed change in rules to list and trade shares of these trusts.
According to ETF Securities, investments in platinum ETF increased +155% yoy to 434 869 oz in 2009. Investment demand has played an important role in pushing platinum price upward in 2009 (+56%). Growth in palladium investment was even stronger. Palladium holdings in ETF Securities jumped +293% in 2009. Johnson Matthey said that approval of the new ETFs will general additional demand of 200K oz for both platinum and palladium.
In the physical market, demand for platinum is expected to have dropped -4.4% in 2009 due to global economic recession. In 2010, recovery in the auto sector should boost demand for platinum as well as other PGMs. While China will continue to be the growth driver, recovery in fleet purchases and the new light duty vehicles after the introduction of the first stage of Euro V emissions legislation should also lift demand.
The platinum sector may return to supply/demand shortage in 2010 (as in 2007 and 2008) as demand for autos improve but mine productions in South Africa may continue to face problems such as power outage, strikes and safety issues. These are potential causes to production disruption.
Gold price remains strong after a +2% rise Monday as driven by rallies in PGMs and decline in USD. Elizabeth Duke, a Fed Governor, said that moderate economic growth in likely to keep interest rates low for an extended period. This damped speculations that policymakers will raise the Fed funds rate by June.
Crude oil price falters below 2009-high at 82 although the momentum remains strong. The market's focus is on US factory orders and pending home sales for November. Both data are expected to be worse than the prior month. After US close, the industry-sponsored API will report its estimates on oil inventories.