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BMO: Palladium Prices Still Soaring; Substitution Risk High

Kitco News

Spot palladium prices hit yet another record high early Wednesday, but this could ultimately mean the risk of substitution toward more use of sister metal platinum in auto catalysts, says BMO Capital Markets. Analysts say for now, palladium remains underpinned by Europe’s shift away from diesel-powered engines, which require platinum instead. Gasoline-powered cars historically used palladium, although there has been conjecture for some time now more platinum could be used as palladium prices keep soaring. As of an early-Wednesday research note, BMO reports spot palladium got up to $1,340.50 an ounce. The metal is already up 6.5% since the start of the year, BMO says. “Despite significant outflows in palladium ETF [exchange-traded-fund] holdings, which have declined over 18,000 ounces (minus 15%) since the beginning of the August 2018 rally, palladium continues to benefit from an unresponsive supply outlook and we see a persistent deficit over the coming years and improving auto-catalyst demand outlook as supportive of prices,” BMO says. “However, with current prices trading at a near $500 premium to platinum, substitution risk remains high.” As of 9:09 a.m. EST, spot palladium was $6.10 higher to $1,329.10 an ounce.

By Allen Sykora of Kitco News; asykora@kitco.com

 

SP Angel: India’s 2018 Gold Demand Hurt By Weak Rupee

Wednesday January 9, 2019 09"17

Gold imports in India, the world’s second-largest gold-consuming nation, fell sharply in 2018 as buying was deterred by high domestic prices due to a weak rupee, says commodities brokerage SP Angel. According to news reports, India’s purchases from overseas fell 20% to 762 tonnes. “The figure represents the second-smallest amount shipped into the country this decade,” SP Angel says. Analysts later add, “Demand for gold across the Asian nation has tumbled as a slump in the rupee made the metal more expensive in the price-sensitive market. A liquidity crunch and government measures to curtail consumption have exacerbated the decline. The near-term outlook remains positive, however, with demand expected to rise up to 20% as purchases for investment may pick up.”

By Allen Sykora of Kitco News; asykora@kitco.com

 

Bannockburn: Keep Fitch’s Warning In Perspective

Wednesday January 9, 2019 09"17

Fitch has issued a warning for U.S. government debt, but Marc Chandler, chief market strategist with Bannockburn Global Forex, says to keep the warning “in perspective.” He points out that the news has prompted little market reaction and “for good reason.” First, the rating cut is not imminent, Chandler says, pointing out that Fitch listed a timeline on whether the U.S. government shutdown continues into March and the debt ceiling becomes a problem several months later. “Second, S&P took away the U.S. AAA rating in 2011.  It still stands at AA+,” Chandler says. “The impact was negligible.  A Fitch downgrade would look bad, but there is still no compelling alternative to the U.S. Treasury market in terms of depth, breadth, and transparency.” Further, he pointed out, “Fitch warned last year that it might take away the AAA rating, but it did not do so.”

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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