Thursday, 6 October 2011

Platinum and palladium prices subdued by economic uncertainty

Platinum and palladium prices subdued by economic uncertainty
Source :
Platinum and palladium prices remain under pressure. In yesterday's trading session platinum fell to $1,448 per troy ounce, while palladium dropped as low as $540 per ounce – though the latter recovered slightly afterwards. The gold price is now 10% higher than the platinum price – the highest gold premium relative to platinum for two decades. Base and non-ferrous metals also came under sales pressure.

Yesterday evening the Comex gold price slid below $1,600 per troy ounce, recovering afterwards to the important technical mark of $1,610 per troy ounce. In recent trading sessions the gold price has been fluctuating between $1,610 and $1,675 per troy ounce. Consolidation is the name of the game in the gold market for the moment. The situation at the silver markets is similar. Yesterday the white metal dropped below $29 per ounce, recovering afterwards to the psychologically important mark of $30 per ounce.

At the US Congress, Federal Reserve Chairman Ben Bernanke was asked about the impact that an escalation of the European sovereign debt crisis could have on the US economy. The Fed Chairman answered that there are no safe bets; even if the American banking system hardly owned any Greek debt, and even if the US banks had been able to stock up on liquidity since the heyday of the financial crisis, a disorderly Greek default would cause new turbulences at the financial markets. In such a scenario even the US banking system would not be immune to the aftershocks from a European banking earthquake, and the financial markets would suffer a shortage of liquidity.

Should this be the case, the Fed was already prepared to implement new programmes to provide the markets with liquidity. The Fed has signed a swap-agreement with the European Central Bank (ECB) to provide the ECB with enough dollars in case of emergency, so as to avoid a crash in the interbank lending market. But in the event of a disorderly Greek default, Europe would most certainly drag the US economy down with it. It's just a question of defining the term "disorderly", since a debt default will always be a debt default – regardless of the language used to soothe financial markets’ pain.