Platinum Summary

Platinum supply from Southern Africa is steadily expanding and North American output is running well ahead of 2003 levels. Reduced lease rates and a narrower premium of spot to forward metal prices testify to an improvement in physical availability.

Following the liquidation of long futures positions in late April, the price of platinum has largely remained within the bottom half of our forecast of $780 to $920; the fundamentals suggest this will continue.

Palladium Summary

In May, we said that “palladium demand has the potential to rise faster in 2004 than it did in 2003” but we also emphasised that “supplies of palladium are expected to rise substantially”. We maintain this outlook.

With inventories having been run down, the US auto industry is purchasing greater volumes of palladium this year than in 2003. A market for palladium jewellery is emerging in China , providing a significant boost to global demand for the metal.

Supplies of palladium are increasing from mining operations in South Africa and North America, Stillwater is selling metal from the stock it gained when a majority shareholding was sold to Norilsk Nickel, and the volume of palladium recovered from recycled autocatalysts continues to rise rapidly.

The palladium market is fundamentally oversupplied but, to date, investors' net long positions have provided support for the price near to the bottom of our forecast range ($200 to $340). Palladium, therefore, remains vulnerable on the downside to a change in speculator sentiment.