Palladium jumped to its highest level since early 2001 on Wednesday, benefiting from a five-month strike in South Africa and strong demand from the auto sector. Palladium has risen 20 percent so far this year, underpinned by supply worries after a South African strike over wages took out 40 percent of global platinum output and hit the domestic economy. The country is the world's second-biggest producer of palladium.
A fresh round of wage settlement talks between the main mine workers' union and major platinum producers broke down on Monday, when the metal rose 1.7 percent. It touched a peak of $862.50 an ounce on Wednesday, its highest level since February 2001. Prices rose 0.8 percent to $859.75 an ounce by 1503 GMT. "Palladium strengthened on the back of the strike situation in South Africa... the collapse of the mediation talks has been the main trigger, clearly indicating the supply situation is tightening," Quantitative Commodity Research director Peter Fertig said.
Adding to the rise, China's auto sales rose 13.8 percent to 8.07 million units in the first five months of the year, Standard Bank said. Palladium is used in catalytic converters to clean exhaust emissions, most heavily in gasoline-powered vehicles. "The rise in passenger vehicle sales in China bodes well for palladium demand, as it implies greater vehicle production and more auto catalysts," Standard Bank added.
Platinum, which gained 2 percent in the previous session, was up 0.2 percent at $1,476.20, below a three-week high of $1,485.00 hit in earlier trade. South Africa's Impala Platinum, the world's No 2 producer of the precious metal, said it had nothing more to offer to resolve a five-month strike over pay that has cut output and slowed the economy. The strike has cost Implats and other producers Anglo American Platinum (Amplats) and Lonmin collectively about $2 billion in lost revenue.
GOLD STEADY Gold added 0.1 percent to $1,264.00 an ounce, holding above a four-month low of $1,240.61 hit last week and benefiting from struggling equity markets and a slightly weaker dollar. "Around these levels, we can say demand seems to be slowing down a little bit. On the investment side, I don't think people are aggressive," said Ronald Leung, chief dealer at Lee Cheong Gold Dealers in Hong Kong.
Stocks slipped from near recent highs on Wednesday, while the euro retreated towards a four-month low in the wake of upbeat US economic data and the European Central Bank's monetary easing. The dollar was down 0.1 percent against a basket of main currencies. A weaker US currency makes dollar-denominated assets such as gold cheaper for foreign investors. US gold futures for August delivery rose 0.2 percent to $1,261.90 an ounce. Silver rose 0.4 percent to $19.19 an ounce.
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