BS: Palladium Gains as Biggest Weekly Drop Since 2001 Draws Buyers
By Kim Kyoungwha and Nicholas Larkin
May 21 (Bloomberg) -- Palladium rose for the first time in a week in London on speculation the metal’s biggest weekly drop since September 2001 drew buyers. Platinum fell.
Palladium had slid to a 15-week low on concern Europe’s debt crisis and slowing growth in China may erode consumption, and as some investors profited from this year’s rally to cover losses in other assets. Commodities including gold, copper and oil fell this week and the MSCI World Index of equities headed for a 5.5 percent weekly drop. Before this week, palladium had gained 29 percent this year and platinum was up 17 percent.
“Fundamentals were thrown out the window this week as an intense movement to liquidate long positions, particularly in assets carrying any hint of risk,” drove the metals lower, Edel Tully, an analyst at UBS AG in London, said today in a report. “Longer-term believers in the metals should be aware that good levels at which to load up are not far off.”
Palladium for immediate delivery gained 4.5 percent to $435.50 an ounce at 3 p.m. in London, erasing a slide of as much as 4.9 percent and cutting its weekly drop to 17 percent. Platinum fell 0.4 percent to $1,506.22 an ounce and is down 12 percent this week, the most since October 2008.
“Investors who had bought precious metals and commodities en masse are taking advantage of price gains to cover losses” in other assets, said Kim Jeung Hun, a trader with Tongyang Futures Co. in Seoul. “With the euro stabilizing, there’s also temptation for bottom-fishing in other badly bruised markets.”
Exchange-Traded Funds
Platinum and palladium are used mostly for pollution- control devices in cars, and in jewelry. The introduction of exchange-traded funds backed by the metals in January may have boosted demand.
Palladium may trade at $350 an ounce in one month, down from a previous forecast of $600, and may rebound to $475 in three months, UBS’s Tully said. She lowered her one-month platinum estimate to $1,400 an ounce from $1,800 and expects the metal to trade at $1,575 in three months.
Palladium rose every month starting in January 2009, the longest streak since at least 1993, after auto sales in the U.S. and China climbed together for the first time since at least 2006. Platinum gained every month since July 2009.
Toshiyuki Shiga, chairman of the Japan Automobile Manufacturers Association, said yesterday the European crisis has made him less optimistic about the global auto market than a month ago.
“There’s an intensified risk-averse feeling,” said Kate Harada, a Tokyo-based senior trader with Mitsubishi Corp. “The majority of daily turnover was driven by hedge funds, ETFs and short-term players. Once the markets calm down, people will discuss fundamentals again. Then I would expect a price recovery.”
--Editors: Jarrett Banks, John Deane.
To contact the reporters on this story: Kyoungwha Kim in Singapore at kkim19@bloomberg.net; Nicholas Larkin in London at nlarkin1@bloomberg.net.
To contact the editor responsible for this story: Stuart Wallace at swallace6@bloomberg.net.
