Platinum Falls to 11-Month Low, Palladium Drops on Dollar, Oil

By Halia Pavliva

Aug. 19 (Bloomberg) -- Platinum fell to an 11-month low and palladium slumped to the lowest since February 2006 as a rallying dollar and declining oil prices eroded the appeal of the precious metals as hedges against inflation.

The dollar rose to a six-month high against the euro after a government report showed U.S. wholesale prices increased in July twice the amount that economists forecast. Crude oil fell for a fourth day. Platinum has dropped 36 percent since the end of June and palladium is down 40 percent as the dollar rebounded from a record low against the euro in mid-July.

The metals are ``under pressure again as the dollar firmed and crude slipped lower,'' John Reade, the head of UB AG metals strategy in London, said today in a note to clients.

Platinum futures for October delivery fell $60.80, or 4.4 percent, to $1,333.10 an ounce at 9:50 a.m. on the New York Mercantile Exchange, after earlier dropping to $1,307, the lowest for a most-active contract since Sept. 20. The metal fell 11 percent last week, the most since September 2001.

Palladium futures for September delivery fell $7.80, or 2.7 percent, to $279.10 an ounce on Nymex, after earlier reaching $267.90, the lowest for a most-active contract since Feb. 14, 2006. The price declined 25 percent this month before today, including a 14 percent drop last week, the most since March.

``The sharp sell-off seen in precious metals over the past six weeks shows no sign of abating,'' Reade said. ``Until the dollar tops out, it is too dangerous to be long outright at current levels.''

Oil, Dollar

Oil prices have declined 23 percent from the record $147.27 a barrel reached on July 11 as the dollar rose for a fifth week against the euro and the Organization of Petroleum Exporting Countries warned of risks to demand from slower global growth.

The U.S. Dollar Index, which measures the currency against those of six major trading partners, today rose to the highest level this year. Some investors purchase precious metals priced in dollars when the U.S. currency falls and crude oil rises.

Platinum also has plunged on concern that demand from the automotive industry may decline as economic growth weakens. Car and light-truck sales in the U.S., the world's largest market, are on a pace to make 2008 the worst year since 1993.

About 60 percent of global platinum output is used to make pollution-control parts for car-exhaust systems, according to estimates by Johnson Matthey Plc in London, which makes about a third of the world's auto-emissions catalysts. The metal is also used to make jewelry, glass for liquid-crystal displays and emissions filters for oil refineries, ships and construction machinery.

To contact the reporter on this story: Halia Pavliva in New York at hpavliva@bloomberg.net.