One of the biggest conundrums in the bullion markets at the moment is why PGM prices remain relatively lacklustre despite the fact that we are now into week 12 of the South African producer strike... there are however signs that this may be about to change.

Granted that mine production has not fallen to zero - but we know the production pipeline is remarkably thin and supply disruptions have historically impacted prices disproportionately as industrial companies - car makers in particular - chase the market higher. As such, market traders will record the more than doubling of prices and the cost of borrowing exceeding the cost of buying the metals (work that one out) as available supply evaporates overnight.

Looking back over the last few years we can say that despite ongoing global economic weakness, the car sales has remained relatively impervious to the downturn despite being a big ticket item - in fact new car demand has actually risen to an all time high of over 80 million cars per annum (that's 2.6 cars per second). As such, we can say that PGM offtake has over the last few years remained surprisingly firm... which only goes to make the non-reaction to the current outages all the more surprising.

Platinum and palladium lease rates are normally regarded as the advance warning that something is amiss and will invariably presage a move in prices. Platinum borrowing costs are, to all intents and purposes, completely unchanged suggesting that loco Zurich stocks remain plentiful and the market has easily absorbed the mine supply problems. Borrowing costs are currently around 0.28% for the 2 month and the 6 month period.

Palladium however is just starting to respond. The two and six month rates have doubled from 0.25% to 0.5% but in general terms remain 'affordable'. With old Russian palladium stocks said to have been largely exhausted about a year ago, the market demand has hitherto been satisfied from current production until now.

The oddity about this however is that palladium is responding and not platinum given that South African production is predominantly platinum (which is strike-bound) whereas palladium is predominantly from Russia (which is not...). It remains to be seen whether this is an extension of the Russians withholding gas to Europe story or whether this is a genuine supply issue - either way, palladium may just be primed for a roller-coaster ride.

Whilst Sharps Pixley Ltd has used reasonable endeavours to ensure that the information provided by Sharps Pixley Ltd in the newsletters is accurate and up to date as at the time of issue, it reserves the right to make corrections and does not warrant that it is accurate or complete. News will change with time. Sharps Pixley Ltd hereby disclaims all liability to the maximum extent permitted by law in relation to the newsletters and does not give any warranties (including any statutory ones) in relation to the news. This is a free service and therefore you agree by receiving any newsletter(s) that this disclaimer is reasonable. Any copying, redistribution or republication of Sharps Pixley Ltd newsletter(s), or the content thereof, for commercial gain is strictly prohibited.

Recommended Content


Recommended Content

Editors’ Picks

AUD/USD: A tough barrier remains around 0.6800

AUD/USD: A tough barrier remains around 0.6800

AUD/USD failed to maintain the earlier surpass of the 0.6800 barrier, eventually succumbing to the late rebound in the Greenback following the Fed’s decision to lower its interest rates by50 bps.

AUD/USD News
EUR/USD still targets the 2024 peaks around 1.1200

EUR/USD still targets the 2024 peaks around 1.1200

EUR/USD added to Tuesday’s losses after the post-FOMC rebound in the US Dollar prompted the pair to give away earlier gains to three-week highs in the 1.1185-1.1190 band.

EUR/USD News
Gold surrenders gains and drops to weekly lows near $2,550

Gold surrenders gains and drops to weekly lows near $2,550

Gold prices reverses the initial uptick to record highs around the $$2,600 per ounce troy, coming under renewed downside pressure and revisiting the $2,550 zone amidst the late recovery in the US Dollar.

Gold News
Australian Unemployment Rate expected to hold steady at 4.2% in August

Australian Unemployment Rate expected to hold steady at 4.2% in August

The Australian Bureau of Statistics will release the monthly employment report at 1:30 GMT on Thursday. The country is expected to have added 25K new positions in August, while the Unemployment Rate is foreseen to remain steady at 4.2%.

Read more
Ethereum could rally to $2,817 following Fed's 50 bps rate cut

Ethereum could rally to $2,817 following Fed's 50 bps rate cut

Ethereum (ETH) is trading above $2,330 on Wednesday as the market is recovering following the Federal Reserve's (Fed) decision to cut interest rates by 50 basis points. Meanwhile, Ethereum exchange-traded funds (ETF) recorded $15.1 million in outflows.

Read more
Moneta Markets review 2024: All you need to know

Moneta Markets review 2024: All you need to know

VERIFIED In this review, the FXStreet team provides an independent and thorough analysis based on direct testing and real experiences with Moneta Markets – an excellent broker for novice to intermediate forex traders who want to broaden their knowledge base.

Read More

Majors

Cryptocurrencies

Signatures