Swiss bank UBS favors Palladium over Platinum

UNITED STATES September 24 2014 8:13 PM
NEW YORK (Scrap Register): Market participants appear to favor palladium over platinum, said UBS, reporting on meetings with US clients and contacts.

According to UBS, much of the unfriendliness to platinum stems from sheer frustration with its price activity this year, especially against a backdrop of the historic South African strike. This intense frustration is preventing investors from looking at platinum as a value trade, despite its significantly cheaper price tag.

Instead, many are focusing on the abundant above-ground stocks of metal, the absence of much corporate buying sub $1,400, low expectations of restructuring amongst the South African majors along with a faster return to full production, post-strike. On a two-year plus basis, there are few players negative on platinum, based on fundamentals. But few are prepared to buy now for the long haul.

But while palladium remains the preferred precious metal, enthusiasm has calmed down from this summer.

"The risk/reward of buying in the high $800 (area) was deemed too low, and many are waiting for a more material pullback before jumping in again, said UBS. "There is a view that speculative net length remains too high despite some long liquidation. A move towards $750 would excite perspective longs, but human psychology would also have to feature too - when it came down to it how many would buy into a falling market?"