Saturday, October 9, 2010
By Claudia Carpenter and Sungwoo Park:
Palladium rose to a nine-year high in London and New York on speculation that reduced currency values and steps to revive growth will accelerate demand for the metal.
ETF Securities Ltd.'s ETFS Palladium Trust, started in January, has bought 44,437 ounces of the metal in the past three days, according to information on the company's website. That's 7 percent of global investment demand for all of last year, based on Johnson Matthey Plc estimates. Palladium is also needed by car manufacturers to make catalytic converters.
"Palladium is in demand because of a recovery in industrial demand and as a store of value for investors," said Daniel Briesemann, an analyst at Commerzbank AG in Frankfurt. "Not only gold and silver are profiting from investment demand but also platinum and palladium."
Palladium for immediate delivery rose as much as $16.50, or 2.8 percent, to $602.75 an ounce, the highest since June 27, 2001, and was up 2.7 percent at $602 an ounce at 12:20 p.m. in London. Palladium for December delivery advanced 2.8 percent to $606.25 an ounce on the New York Mercantile Exchange, the highest price for a most-active contract since June 28, 2001.
Palladium has climbed 48 percent this year, more than double the gain in platinum and exceeding advances in gold and silver.
Palladium may rise to $700 an ounce over the next six to 12 months, Colin Fenton and Matthew Lehmann, analysts at New York- based JPMorgan Chase & Co., wrote in a report dated yesterday. There is "solid emerging-markets' physical demand for the auto sector," they wrote in the report.
Palladium is viewed as "the most likely" of the three major platinum-group metals, including platinum and rhodium, to return to deficit, Morgan Stanley said in a report on Oct. 5.
Russia may have exhausted state inventories of the metal, Norilsk Nickel said in May. Sales from state stockpiles reached 960,000 ounces last year, the third-biggest contributor to world supply after mine output from South Africa and Russia, according to Johnson Matthey.
A summary of what he goes onto to say is:
"The Federal Reserve noticed a tremendous draw down of money market accounts in the USA to the tune of $550 Billion dollars in a matter of an hour or two.
Money was being removed electronically.
The treasury tried to help with $105 Billion.
But could not stem the tide.
It was an electronic run on the banks
The treasury intervened but had they not closed down the accounts they estimated that by 2 PM that afternoon. Within 3 hours. $5.5 Trillion would have been withdrawn and collapsed and within 24 hours the world economy."
Subsequently on the 19th of September Hank Paulson announced publicly that he needed $700 billion to save the banking system from collapse. When his plan was met with public outrage and general congress revolt Hank Paulson had a closed door meeting with Congress after which most members of Congress voted for the Paulson plan. It has subsequently been reveled, from several sources, that Hank Paulson threatened the imposition of Martial Law if his bank bailout plan was not passed immediately.
In The Delaire Report issue number 24, I clearly stated that "we will see the price of silver make a decisive break above $18.50/oz and a rapid move to $21/oz. Thereafter, it should challenge the $25/oz level. It is also my firm belief that silver is going to be one of best performing assets during the next five years."
During the last six weeks the performance of silver has been exceptionally stellar and to be frank, it has surpassed my expectations. By that I mean the price has got to a level in a shorter time frame than I expected. But, the price level does not surprise me, nor does the percentage move. On many occasions I have written about the percentage moves in silver and how they are generally much greater than those in gold.
Like gold silver is effected by the global currency crisis and as the dollar continues to weaken, silver prices will continue to increase. As the price of silver trades at a 30 year high and as the price has increased by 31% in less than six weeks, everyone is asking if there is going to be a correction. Well, of course there will be a correction, but I am not sure if we will see it occur at these levels or if we will see it once the price of silver hits $25. But, as long-term investor who cares? I am not in the business of trying to time every move in the market and believe that it is impossible to do that. However, the longer term bullish trend is very much intact and the price has a long way to go before it peaks. As the price of gold gets more expensive some investors may prefer silver to gold because it is less expensive and because it is still very much undervalued.
"Wealth preservation are the key words… We expect silver to keep trading in parallel or stronger than gold, but with higher volatility as recovering industrial demand and even stronger investor demand gives the metal an extra boost," stated Filip Petersson of SEB Commodity Research in an article in The Wall Street Journal.
On Tuesday, holdings in global silver exchange-traded products rose by 103 metric tons to set a record of 13,867, reports Barclays Capital. In India, the world's largest importer of gold, there is a growing sentiment that silver is replacing the yellow metal. For the first half of 2010, silver imports in India have risen 579 percent, for a total of $1.69 billion. Many analysts see the momentum in India rising through the festival/holiday buying season.
Last week the United States Mint raised their wholesale pricing above spot on American Silver Eagles to all authorized dealers from $1.50 to $2.00, an increase of a whopping 33%. This year will go down as a record year for Silver Eagle sales, as the United States Mint has already sold more than 25 million coins year-to-date.
The forecast for silver is overwhelmingly positive, and I still urge investors to buy some of the physical metal. Buy bullion bars and bullion coins no matter the premiums. In a few years time the prices that you pay now are going to look very cheap in comparison to prices you are going to have to pay in the future.
The recent move in silver has been very strong as evidenced by the number of bullish candlesticks. A market with such momentum seldom collapses overnight. It is possible for the price of silver to move higher before we see a correction and some consolidation.