Precious Metals continue to surge as global markets are boosted

February 3rd, 2008

Reported by Kimberly Birkland

The trio of precious metals:  Platinum, Palladium, and Rhodium continues to surge upward while global markets have boosted amid the Feds second interest-rate cut in nine days.

The Federal Reserve's second interest-rate cut in nine days last week boosted global markets and soothed concerns that the US recession would take the global economy along with it.  A measure of volatility on the index rose to 66 at the end of last week, its highest in at least 10 years.

Aquarius Platinum Lt.d. (AQP AU), and Australian miner of the precious metal in South Africa and Zimbabwe, climbed 10 percenty, making it the best performer on the index so far today.  Nkwe Platinum Ltd. (NKP AU), which mines platinum in South Africa, jumped 6.5 cents, or 7.6 percent advance. 

Platinum extended a rally to a record Feb. 1 on the hypothetical prediction that blackouts and mine disruptions in South Africa, the world's largest distributor of the metal, totaling 75% of platinum, will trigger a wider shortfall than originally forecasted.  The metal has surged 48 percent in the past year, including a 5.4 percent gain last week.

Simultaneously, U.S. stocks are rising, capping their best weekly gain in five years, after Microsoft Corp.'s $44.6 billion bid for Yahoo! Inc. and a plan to rescue bond insurers overshadowed the first decrease in jobs since 2003. (bloombergnews.com)

Palladium as well is rising on the stock market.   Futures for March delivery rose 5.7 percent, to $417.05 an ounce, for the biggest percentage one-day increase since June 2006.  The price of palladium was also boosted by the mining problems in South Africa including floods and energy blackouts.

"The more subdued response relative to platinum reflects a lower exposure to South Africa, which account for only 36 percent of global production," said Standard Chartered analysts led by Helen Henton, London-based head of commodity.

The shortfall in global platinum supplies will probably drop to 4.96 million ounces from 5.2 million last year, the bank said.  (bloombernews.com)  UBS also boosted its price forecasts for 2009 to 2016.

Supplies have fallen short in seven of the eight past years, said London-based Johnson Matthey, the world's largest distributor of the metal.  Mined production declined last year for the first time since 1999, Johnson Matthey estimated last November.

There is some hope that power shortages are slowly easing in  South Africa.  Most South African mines were shut down for five days in a row the past week due to electricity shortages.  Power supplies to mines will be limited to about 90 percent of normal levels for at least the next four weeks, Eskom (the state holding's utility source), Eskom's spokesman Andrew Etzinger said.

"It appears that the power crisis in South Africa is starting to ease," Standard Chartered analysts said in the report.  "Assuming this goes according to plan, prices are likely to head lower in February.  Over the year as a whole though, we remain bullish about platinum and prices should resume their upward trend."

Palladium continues to follow the trend along with the other two precious metals used in catalytic converters, dental instruments, medical instruments, jewelry, and other technology.  Palladium is expected to average $380 an ounce through March 31, compared with $361 an ounce in the fourth quarter, the report said.

Moving right along…the bank also raised its 2008 rhodium forecast to $7,500, from $6,000.  The metal is mined with platinum usually and South Africa accounts for about 84 percent of global supply.  Rhodium for immediate delivery rose $25, or 0.3 percent, to $7,325 an ounce today, all according to data from Johnson Matthey Plc.

So what does this surge in three high-commodity, high-demand metals:  platinum, palladium, and rhodium, besides being used as hedges against the recession and fading U.S. economy, how are they affecting the world at large?  These three metals are used in all catalytic converters, no matter what car you drive, and the metals are at an increasing demand, more so than ever. As recycling companies crop up by the handful, someone is going to take advantage of this situation.  So read on to the next article….