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Precious Palladium Metal Gaining Favor Among Jewelers

palladium diamond ring

Jewelery makers in Asia shrugged off platinum’s falls from record highs as they struggled to use up inventories, and dealers said today more carmakers were turning to sister metal palladium as a substitute.

“Over US$1000 you should get less interest, certainly less demand,” said Alastair McIntyre, head of marketing at ScotiaMocata in Hong Kong.

“After US$1000, you should start to see, you have either perceived or actual substitution in palladium,” he said.

Platinum increased to US$1,055 an ounce on today mainly due to gains in gold as investors diversified into precious metals on worries about inflation, the US dollar’s outlook and tensions in the West Asia over Iran’s nuclear ambitions.
The metal, which rallied as much as 18 per cent in 2005, has since dropped as funds booked profits, but dealers said the declines failed to stir up interest from main consumers such as China and Japan.

Customs data from China showed declines in platinum imports in January, when the metal used in jewelery and to clean car exhaust fumes began its steady climb. China is the world’s largest consumer of platinum jewellery.

China’s imports from Switzerland, South Africa and Japan fell to 952 tons in January, down 41.3 per cent from the same month in 2005.

Spot platinum was quoted around US$1,044 an ounce while its much-cheaper sister metal, palladium, was at US$300.

“Consumers don’t react much to prices but if you talk to the manufacturers, they are very skeptical about continuing their production,” said a dealer in Shanghai.

“The margins are very low. Because of the price fluctuations in the international market, manufacturers are not really keen to stock up. They only make jewellery when they receive orders,” he said.

Precious metals refiner Johnson Matthey said China’s purchases of platinum for jewelery manufacture was expected to fall about 10 percent to 910,000 ounces in 2005 as high prices scared off buyers.

Talk that more carmakers would shift to palladium had triggered fund buying, propelling the metal to its highest in nearly two years at US$320 in February, but dealers said the increase may not deter demand.

“The thing is that when people are waiting for a price level to enter, they tend to make mistakes,” said a precious metals dealer in Hong Kong.

“If you look at the gold price, it has gone up from US$250 to almost to almost US$600. Every time they waited for the price to fall, they’d been burned because the price continues to go higher,” he said.

Some Hong Kong dealers said they saw demand for palladium from jewelery makers in China since the price fell from highs.

Because of poor margins, China’s platinum jewellers have turned to palladium and white gold – an alloy of gold and other light-coloured metals such as silver and palladium.

“Selling pressure increased when palladium reached US$320. I am still bullish on palladium but it must consolidate,” said another Hong Kong dealer.

Look for Palladium to become more prominent if Platinum maintains and increases it’s price strength.

 December 4th, 2005  
 huni