What are the factors drive Platinum, Plladium? UBS

UNITED KINGDOM April 08 2016 9:11 AM

LONDON (Scrap Register): Platinum and palladium are drawing limited attention from investors right now, with price moves tending to be driven by external forces such as gold and broader risk sentiment, said UBS in a research note. 

For instance, these metals have “barely” reacted to news reports of auto sales -- important since PGMs are used for catalytic converters – and instead more likely to move on the back of gold and changes in equities. “Interest is lackluster and liquidity conditions are poor,” the bank added. 

“Fundamental catalysts are lacking, but investors are also generally less sensitive to these types of news flow at the moment.” Palladium could come under pressure in the near term during earnings season for the first quarter, should equities “take a breather” from the recovery that has been occurring since the mid-February lows, the bank noted.

“Platinum's positive correlation with gold suggests that it is likely to be more resilient versus palladium during bouts of weakness in risk sentiment,” UBS added. 

Analysts add that investors will want to monitor wage negotiations between South African producers and unions in the months ahead. “This could create some choppy price action as any price response is amplified by thin liquidity,” UBS mentioned.