Palladium climbed to a new 11-month peak on Thursday and platinum touched its highest in nearly five months, buoyed by technical buying and positive momentum in the market.
Gold rose more than $4 on a weaker dollar but traded below this week's six-week high of $681.30 an ounce, while silver attempted to break $14 an ounce before paring gains. Spot palladium rose as high as $372 an ounce, the highest since May last year, before slipping to $367/372 by 1432 GMT, compared with $363/368 in New York late on Wednesday.
"Palladium's fundamentals are pretty poor. It's really a technical rally more than anything else," Robin Bhar, metals analyst at UBS Investment Bank, said. "It's a small market and liquidity is poor. One can argue that it's easier to push up palladium than some other markets. We don't trust this rally and think it is unsustainable." According to precious metals refiner Johnson Matthey, palladium demand fell nearly six percent to 6.85 million ounces in 2006, while supply rose by 0.8 percent to 8.48 million ounces, leaving a market surplus of 1.63 million ounces.
Palladium demand for jewellery tumbled 20 percent in 2006 mainly because of a sharp drop in consumption in China, but autocatalyst demand rose seven percent during the year. Analysts said the market was likely to be in surplus this year also because of large stocks in Russia, the world's top producer, and falling jewellery demand.
"We prefer platinum from a supply-demand perspective. The market is in deficit and fundamentals are a lot stronger," Bhar said. Platinum rose to $1,270 an ounce, the highest since late November, before easing to $1,264.50/1,268.50, compared with $1,266/1,271 in the US market.
Supply and demand for platinum are expected to reach record levels in 2007, leaving the global market close to balance after several years of deficit. Dealers said gold was supported by a weaker dollar but the metal struggled to break key technical levels. "The future path of the dollar, oil prices and geopolitical developments are likely to remain key for gold over the forthcoming sessions," Barclays Capital analysts said in a note.
Spot gold rose as high as $679.80 an ounce and was last quoted at $676.10/676.60, up from $675.50/676.50 in the US market. Gold gained after the euro surged to a two-year peak against the dollar on hopes the European Central Bank will signal later in the session that interest rates need to rise further.
In industry news, South African gold output fell 8.8 percent in volume terms while overall minerals production increased 4.4 percent in February compared with the same month the previous year, official data showed. Silver was at $13.81/13.84 an ounce after rising to $13.93, versus $13.79/$13.84 in the US market.
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