One has to simply look at the price action within the PGM group to understand what happens to a market when supply is or is expected to NOT meet demand. A few months back Palladium was trading at $550 and Platinum was trading at over a $100 discount to gold.
This morning finds Palladium flirting with the $800 level and Platinum trading at a $60 premium to gold. Fears of supply disruptions in South Africa have propelled Platinum recently, with Palladium’s catalyst suggested as being the Russian’s inability to meet their supply contracts.
Both these metals are vulnerable to quick and violent pull-backs, but supply deficits never bode well for the bears. Rhodium which also sees its supply coming from the two sources above should be watched closely. The last time there was a serious supply issue, Rhodium traded to $10,000. Its currently at $1,200. Analysts have suggested Rhodium may be in deficit by the second half of 2013.
Gold continues to trade in its tight wedge of $1,665-$1,690. A break is imminent.
By Peter Hug
Global Trading Director
Kitco Metals Inc.
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