Platinum and palladium have come under pressure, amid mounting global growth concerns.

SLOWING DOWN
This week alone, we’ve seen significant downward revisions to global and regional growth forecasts by the World Bank, the Asian Development Bank and the IMF. That’s not to mention the recent downward revisions to US Q2 GDP to an anemic 1.3%, and Q3 expectations to just 1.4%.

KEY MANUFACTURING INPUT
According to the International Platinum Group Metals Association, a quarter of all goods manufactured today either contain platinum group metals (PGMs), or the PGMs play a significant role in their manufacturing process. It is therefore not surprising that indications of a broad economic slowdown would create an expectation of softer demand for the white industrial metals.

HEALTHY AUTO DEMAND
Palladium set 6-month highs in September on the back of robust auto demand and supply concerns centered on South African labor unrest. While there has been a little ebb and flow in the labor situation in recent weeks, it is far from resolved. In fact, some mass mining industry layoffs this week; associated with wildcat strikes, suggest things may be heating up again on that front. So while there may be renewed demand concerns in the PGMs, they are being offset — at least to some degree — by persistent supply worries.

SUPPLY SIDE
About 40% of global palladium supply comes from South Africa, second only to Russia at 44%. By comparison, 80% of platinum supply comes from South Africa. In that context, it makes sense that the latter was the better performer during the recent rally; and has been more resilient in the current corrective phase.

MARKET ACTION
Platinum did mount the expected challenge of the little $1733.00/$1733.50 double top from February (see 12-Sep commentary), reaching an 8-month high of $1728.50 on Friday last week. Palladium gains stalled at $703.60, leaving the corresponding February highs at $722.70/$724.10 well protected. Palladium has been unable to sustain probes above the 100-week moving average, while platinum is holding gains above the 100-week MA.

LOOKING AHEAD
Of the white metals (including silver), I think platinum remains the most constructive from both technical and fundamental perspectives.

However, rising growth risks, along with ongoing concerns over the euro zone debt crisis and US fiscal cliff, make it likely that gold will outperform the white metals over the near to medium term. Global central banks will be forced to continue pushing-back against these risks via their campaigns of super-accommodative monetary policy and currency debasement for the foreseeable future, making a monetary metal like gold increasingly appealing.

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