Platinum, Palladium Gain in N.Y. as Rate Cuts Spur Speculation

By Halia Pavliva

Oct. 9 (Bloomberg) -- Platinum and palladium climbed in New York on speculation that demand for the metals used in car parts and jewelry will rise after more central banks around the world cut interest rates to unlock lending and sustain economic growth.

Commodities and equities gained after central banks in South Korea, Taiwan and Hong Kong joined counterparts in the U.S. and Europe in cutting interest rates. The Federal Reserve and the European Central Bank, joined by the U.K., Canada, Sweden and Switzerland, reduced borrowing costs yesterday. Indonesia said today it will lower minimum capital reserves for banks.

``The mood in most markets is better this morning, as more central banks and governments are joining the push to loosen money,'' Edward Meir, an analyst at MF Global Ltd. in Darien, Connecticut, said today in a note to clients. ``U.S. stocks are called sharply higher this morning. The dollar is weaker for the second day running.''

Platinum futures for January delivery rose $26.50, or 2.6 percent, to $1,038.60 an ounce at 9:27 a.m. on the New York Mercantile Exchange.


Platinum will gain on tight supplies, BlackRock Investment Management Managing Director Graham Birch said. The metal is becoming harder to mine because of a shortage of available deposits, a lack of power supplies and political instability in key regions, Birch said today at a conference in London.

``Platinum is one of my favorites,'' he said.

Most-active futures fell to $940, the lowest since November 2005, on Oct. 6, down 59 percent from a record $2,308.80 on March 4. Prices collapsed partly because auto sales have plunged in the U.S., the world's biggest market, and most platinum consumption is for parts used to sift pollutants from engine exhaust gases.

Sinking Auto Sales

Sales of light vehicles in the U.S. fell the most last month since January 1991. Platinum lost 50 percent in the third quarter and 31 percent last month, the worst monthly decline since at least 1986.

Automakers account for more than 60 percent of global platinum use, according to London-based metals trader Johnson Matthey Plc.

Car sales have fallen as a financial crisis sparked by rising subprime-mortgage defaults spread from Wall Street investment banks to Europe and Asia, clogging credit markets and spurring coordinated central-bank rate cuts yesterday.

Palladium futures for December delivery rose $4.30, or 2.2 percent, to $204 an ounce in New York. The price plummeted 56 percent in the third quarter and 34 percent last month, also the biggest declines since at least 1986. Most-active futures have dropped 47 percent this year before today.

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