Monday, July 7, 2008


Gold's astronomic rise in price can be placed mainly on two factors: the sinking of the US dollar and a general fear of inflation and the instability of paper assets. Not too much attention has focused on the supply side of gold and silver, but more of platinum, palladium and plain old copper.

"In South Africa, the main power supplier, Eskom, has run out of reserve capacity, and this has caused rolling power cuts," Trickey says. "Many platinum and palladium mines had to close temporarily at the end of January, since power could not be guaranteed, and this posed a safety risk, especially for the underground mines." The result is that mines are operating at just 95% capacity, at a time when industrial demand, primarily in China, remains at full throttle. "They're able to operate on that, but companies are looking at ways to find individual power sources of their own," she says.

Palladium, thanks to these and other factors, rose from less than $200 per ounce in March 2003, to nearly $580 in February this year before settling down to its current mid-$400 range. Both platinum and palladium have vast industrial uses, they're quite pricey and can be substituted for each other. the short-term prognosis for platinum has most analysts at cross purposes. Platinum recently traded at up to $2,276 per ounce before settling down to its current range just below $2,000.

Palladium on the other hand has a strong following mainly due to the paradox that, as with platinum, most of the factors that can make demand for the metal go down actually make it go up. In other words, the factors that hurt demand for palladium as an industrial metal actually help it as a precious metal, and vice versa - at least, that's the perception. A global deflationary trend would, in reality, drag down the price of both precious and industrial metals.

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