Platinum, Palladium Fall On Strike Cessation

Gold and silver held up fairly well in trading, yesterday, considering the gains in the U.S. dollar, as traders started to turn their focus back to the debt problems in Europe, as Spain continued to show reluctance to formally request financial aid from the European bailout fund. Such a request, which for Spain would go hand-in-hand with new austerity measures and fiscal oversight from Brussels -- is of course the condition for the start of unlimited bond purchases by the European Central Bank, hence the disappointment in the markets.

The December gold contract settled almost unchanged at $1,771.20, while the silver contract gained 35.1 cents (up 2.1%) and closed at 34.718. It even briefly printed a 35-handle with a high of $35.10 – a price we haven’t seen for over half a year. This is a rather strong showing, taking into account that the U.S. dollar index (USDX) rose to 79.25 (a gain of 0.3%) leading to the usual “risk off” patterns. Silver has proven to be one of the best inflation hedges time and time again. Though looking ripe to work off some of the overbought condition in the short term, it is hard to put the extraordinarily bullish outlook for silver into words. The major central banks are standing ready to print in unlimited fashion and will hold interest rates at zero for at least another three years – a policy best described by the term “financial repression”, during which the government lowers its debt burden by devaluing the savings of its citizens.

Platinum And Palladium Smackdown
While gold and silver continued to shine, platinum and palladium took a beating, yesterday, with platinum falling $36.30 (2.2%) and palladium losing $21.75 (3.1%) on news that workers at a South African Mine agreed to end their strike. According to reports, workers at a mine owned by Lonmin PLC have accepted a wage increase of 22% and will return to work on Thursday. Recently, there have been several supply disruptions after continued strikes in South Africa, which accounts for almost 80% of global platinum mine production.

EU Auto Sales Also Down
To add to the bearish news, August auto sales in the European Union have been declining for the 11th. month in a row and are down by 8.9% compared to last year. The austerity-stricken countries in the periphery have been especially hard hit, while sales in Germany were a bit better. In contrast to that decline, the largest automobile markets -- the United States and China -- are still doing very well and continued to make up for the drop in Europe. Platinum and palladium investors will be interested to see whether this trend can be maintained as the automobile industry makes up about 60% of the demand for both metals which are primarily used to build catalytic converters.