Palladium prices hit a two year high on Monday, with traders
citing strong physical buying of the metal for auto use in Japan also sweeping
its sister precious metal platinum to its highest since August 2008.
After volatile trade in Asia, gold prices were steadying above
$1,125 an ounce in sparse activity due to public holidays in some European
countries.
Palladium, used largely in the auto industry for catalytic
converters, rose to $492.50, its strongest since March 2008, and was at $488.50
by 1046 GMT.
“We are seeing strong demand from palladium from the industrial
sector in Japan.
There’s also buying in platinum but it’s not that strong,” said
a physical dealer in Tokyo.
Spot gold stood at $1,126.25 an ounce, compared with $1,124.50
quoted late in New York on Friday.
It had hit an intraday high of $1,126.70 an ounce on a firmer
euro — not far from a two-week high of $1,127.75 seen on April 1 — but could
face stiff resistance at a 6-1/2 week high around $1,144 hit in early March.
Dealers awaited the release of an ISM survey on the U.S.
services sector for March later on Monday, and a policy meeting by the Reserve
Bank of Australia on Tuesday, expected to raise rates by 25 basis points to
4.25 percent.
“We are likely to see a further strengthening of the dollar
ahead,” said Wong Eng Soon, an investment analyst at Phillip Futures in Singapore,
referring to recent economic data such as non-farm payrolls that supported the
dollar.
“All tightening measures, whether they come from Australia or
China, have the effect of lower commodity prices. I am looking at the topside
resistance at $1,140 and a very firm support at $1,110. Gold has more downside
risk.”
U.S. gold futures for June delivery were up 70 cents at
$1,125.80 an ounce. The New York market reopened on Monday after the Easter
holiday.
The euro stood at $1.3478, shedding some early gains, which also
kept a lid on bullion prices.
A solid rise in private-sector hiring in the United States has
raised talk that the Federal Reserve may raise the discount rate again,
providing support to the dollar.
The Fed surprised markets on February 18 when it raised the
discount rate by a quarter point to 0.75 percent.
On platinum, residual support remained after news on March 30
that Lonmin, the world’s third biggest platinum producer, had shut its No. 1
furnace after another incident at the troublesome smelter, with repairs
expected to take over a month.
“I guess the impact of the Lonmin spillage as well as concerns
over a power shortage in South Africa is still limited on platinum. Physical
demand is not so strong but at least funds have been buying continuously,” said
the Tokyo physical dealer.
Spot platinum stood at $1,677.50 an ounce, while silver firmed
to $17.91 Platinum started to diverge from gold in January after showing a
strong correlation with gold prices in the last quarter of 2009.
But physical dealers said some auto makers had shifted to using
more palladium in diesel and gasoline engines because the price was much
cheaper than platinum, while hopes for a further recovery in the global auto
sector also boosted demand.
Palladium and platinum ended the first quarter 17 percent and 12
percent higher respectively, surpassing the single-digit gains posted by gold
and silver.
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