RBS favours Palladium in precious metals sector

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Category: Silver Prices

Published on Thursday, 28 July 2011 13:26

Written by Will Peters

Palladium is our favourite precious metal and the only one within the complex that is actually in a supply deficit.

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The spot silver price is 0.44% lower at 40.08. The spot gold price is 0.11% higher at 1615.

The spot palladium price is 0.3% lower at 831.

In a note to clients today, analysts at RBS say:

"Palladium is our favourite precious metal and the only one within the complex that is actually in a supply deficit. RBS forecasts the palladium price will average $875 in H2 11, higher than current levels.

"Be careful in the short-term though! Prices have increased too far too soon and may correct first, if concerns over US debt and industrial action in South Africa subside."

Precious metals continue to benefit from the ongoing impasse between Republicans and Democrats on the US debt problem.

Platinum and palladium have been further boosted by supply concerns linked to industrial action in South Africa, which provides 77% of global platinum and 40% of global palladium mine production.

Palladium has been exceptionally strong, gaining more than 4% within a two-hour window yesterday. The rally was augmented by thin trading volumes and short-covering.

Copper is one of our top picks among base metals. Constrained production growth is expected to fuel a full year deficit of 400kt and a rally to an H2 average price of $9,875/t.

RBS say:

"An ongoing strike at Escondida in Chile, the world's largest copper mine (1.087mt in 2010), continues to underpin the copper price. Contractors at the mine have now joined full time staff and BHP, the mine's majority owner, is refusing to negotiate with workers, claiming the strike is illegal.

"Keep an eye on Collahuasi, the fourth largest copper mine (465kt in 2010), also located in Chile. Workers at the mine were due to meet yesterday to discuss demands over bonuses and benefits."