Both Platinum and Palladium are traded on the New York Mercantile Exchange in downtown Manhattan. This trading pit is very small with little liquidity. Even though there are two different commodities they share similarities between them.
When analyzing these markets it is important to have an understanding of the PGM’s (Platinum Metals Group). PGM’s refer to six metallic elements clustered together in the periodic table. The six platinum group metals are ruthenium, rhodium, palladium, osmium, iridium, and platinum. They have similar physical and chemical properties, and tend to occur together in the same mineral deposits. The platinum metals have outstanding catalytic properties. They are highly resistant to wear and tarnish, making platinum, in particular, well suited for fine jewelry. Other distinctive properties include resistance to chemical attack, excellent high-temperature characteristics, and stable electrical properties. All these properties have been exploited for industrial applications.
Platinum together with Palladium and rhodium are primary essentials in auto catalysts that control vehicle exhausts emissions of hydro-carbons, carbon monoxide, oxides of nitrogen and particulate. Auto catalysts convert most of these emissions into less harmful carbon dioxide, nitrogen and water vapor. This makes up about 51% of the uses of these metals. That is a very significant amount. In part of 2008 both of these precious metals prices moved up with the USD decreasing. In (July-October) the USD made a strong recovery and news came out that stated that the US Auto industry was in trouble. Banks could not make loans to consumers that were trying to purchase cars because they could not give any further credit away. This hurt the auto industry sending Ford and GM into a tailspin. GM filed for reorganization under President Obama’s strict 60 day plan and GM received a government investment of approximately of 30 billion. GM couldn’t even give their cars away and the auto lots were stocked with unsold cars. This also sent the platinum and palladium into a tailspin. Both metals lost over 50% of their value in this time. They haven’t been able to retrace their price like gold has because the auto industry still weighs heavily on the price.
When watching these metals you need to take a look at the auto industry and try to get a feel of where these markets might possibly be heading. It is great to look at the USD because the dollar effects the price of the precious metals, and when trading with metals the auto industry is a business you should be knowledgeable about.
Trading in futures and options involves a substantial risk of loss and is not suitable for all investors. Past performance is not necessarily indicative of future results.
