Palladium falls before weekend, but more gains seen
May 23 2014, 17:14
LONDON — Palladium fell on Friday as the dollar firmed and investors squared positions before the weekend, but more gains are expected on worries that an extended strike could drag on even longer in major producer South Africa.
Platinum and palladium were on track for a second straight weekly gain, with gold headed for a flat week.
Palladium shed 0.6% to $827.25 an ounce by 2.00pm GMT as the dollar gained against the euro, making dollar-priced commodities more expensive for Europeans.
The euro dropped to a three-month low against the dollar after a soft German business sentiment survey added to expectations the European Central Bank would ease policy next month.
The dollar hit a six-week high against a basket of currencies in the wake of upbeat US data.
Palladium’s weakness, however, was seen as only a pause in a rally that has pushed it up 16% this year on worries about the impact of the miners’ strike in South Africa. It touched $837.40 an ounce in the previous session — its highest since August 2011.
Traders attributed some of the decline to investors taking profits and squaring positions before the Memorial Day long weekend in the US and Britain’s spring bank holiday on Monday.
"The longer the strike goes on, we are now at the point where people are asking the question about when dwindling stocks will start to have an effect," said Ole Hansen, head of commodities research at Saxo Bank.
"Even though palladium is a smaller market, there’s good flow into ETFs. So there’s basically a good fundamental investment story." Commerzbank said in a note that over the past two days of trading, 19,000 ounces had flowed into palladium exchange-traded funds (ETFs).
"Inflows since the start of the quarter amount to 670,000 ounces. ETF holdings now total just shy of 2.8-million ounces, and thus exceed the annual production of Russia, the world’s biggest producer country." Palladium was set to gain 1.9% this week and platinum 1.6%, the second straight weekly rises for both.
The four-month miners’ strike in South Africa could last much longer, the chief executive of Impala Platinum told Reuters on Thursday, adding that feedback from initial court-mediated talks with the world’s biggest producers and main mining union was lukewarm.
The strike is the longest and costliest industrial action in the mining history of South Africa, the biggest producer of platinum and the second-biggest producer of palladium.
GOLD Spot gold dipped 0.1% to $1,291.94 an ounce and was headed for a largely flat week.
"Gold has been trapped in a very compressed range for well over a month, but we suspect that we could see a substantial move in the days ahead once the Ukrainian elections are over," INTL FCStone said in a note.
Lessening tensions in Ukraine weighed on gold, seen as a safe-haven asset. The metal has been buoyed by the crisis between the West and Russia, gaining about 7% this year.
Russian President Vladimir Putin said on Friday he wanted better ties with the West. His deputy defence minister said Russia would pull back all forces deployed to regions near its border with Ukraine "within a few days", a move that could ease tensions before Ukraine’s presidential election on Sunday.
Have a good weekend (~:GOSWC:~)