• Precious metals delight investors – Gold and silver performing even better than the platinum group metals.

• Gold jumps temporarily above $ 1.000 – Break of resistance line on the charts and new buy-back programme announced by Barrick drive the price higher. But so far no substantial follow-up buying. Many professional analysts remain sceptical because of a weak fundamental situation.

• Silver reaching almost $ 17 – Speculators step in, long-term oriented investors more cautious. Technical environment shows some danger near the 16.30s.

• Platinum on a roller-coaster – Starting with massive losses after the end of wreckage premiums in Germany and the US; later following the gold higher.

• Palladium wildly fluctuating as well – Initially falling below $ 280, followed by an unsuccessful test of the $ 300-mark. ETF-buyers remain confident. Observers however sceptical as car sales may drop.

• Rhodium quiet – But only as far as the price is concerned. Demand out of Asia still booming. Is the doubling of Chinese car sales the reason? Ruthenium with good two-way business, iridium quiet.

Highlights

Precious Metals Weekly 10 September 2009

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Wreckage premiums wrecked: In Germany and the US the „Cash-for-Clunker“-schemes are history. What does that mean for the platinum group metals?

€/gram PD US$/oz €/oz €/gram

High 296.50 203.92 6.56

Low 278.00 191.20 6.15

Latest 290.00 199.45 6.41

Platinum

Precious Metals Weekly Page 2

€/gram

28.63

26.47

28.35

PT US$/oz €/oz €/gram

High 1,295.00 890.65 28.63

Low 1,197.00 823.25 26.47

Latest 1,282.00 881.70 28.35

All prices for the period from 28 Aug. to 10 Sept. 2009

After a cautious start at around $ 1,240 at the time of our previous report, platinum regressed significantly Tuesday a week ago to it’s lowest in four weeks of $ 1,197 an ounce.

Dealers attributed the end of the financial assis-tance to the automobile markets in the USA as well as in Germany as the prime cause for plati-num’s downward move. In both countries sup-portive programmes, in place for a more or less reasonably long period of time, paid dividend and had clearly eased the tension in the respec-tive automotive markets. Last month the USA reported a plus of 1 per cent compared to previ-ous year and a plus of 26 per cent compared to the previous month of July. The “Cash for Clunker” programme in the US supported 690,000 cars, most of these in August, but some also in July.

In Germany the plus of 28.4 per cent to 275,000 new car registrations in August can also be attributed to the “wreckage premium”. So far this year 2.8 million new passenger cars have been registered in Germany. Of this an estimated 800,000 could be on account of the support programme, which otherwise would not have been bought this year. Together with a extra plus of perhaps around 300,000 sales in the USA, the “wreckage premium” in these two markets alone could have been responsible for demand of up to 5 tonnes of platinum-metals.

On top other European nations have also con-tributed to this increase, as has this year’s most successful market in context to new-registrations, namely China. Supported, among others, by tax-benefits, the Chinese automobile

market bought 858,300 vehicles in August this year; compared to same month of previous year – even if a relatively weak month then – still a remarkable increase of 90 per cent.

All in all, the platinum producers have good reasons to thank tax-payers in those nations, for without their assistance through various support programmes, this year would have in all prob-ability been a dismal one as far as demand (and the related price development) is concerned.

After absorbing the initial shock of loosing fur-ther financial support, platinum has bounced back, it appears mostly on the positive moves made by gold. At times the white metal traded up to just under the $ 1,300 an ounce mark; a level not seen since the middle of the 3rd Quar-ter of 2008.

There is however scepticism that things will continue to look that positive. Scrapping of mil-lions of extra cars means that in the not-too-distant future recycled metal from auto-catalysts will find its way to the market. Also the mining companies in South Africa have meanwhile found a workable solution with their miners and the strikes have come to an end. According to Implats and Aquarius, they have lost production of about 70,000 ounces of platinum due to the strikes, this equals to 1 per cent of the annual output, a fact that has certainly helped the price as well. Given that this support factor has now fallen away as well, we as an industrial end-user would at the moment wait and see how things develop before looking at any new hedging strategies.

Palladium

In the past ten days rhodium has remained stable as it continues to trade at $ 1,650 an ounce. This is surprising, given the massive demand seen coming from the Far East. Ap-parently the strong Chinese automobile sales (see above) has lead to unplanned “extra” (not secured under supply contracts) demand for rhodium. This could add up to as much as 1 tonne to the global consumption by the end of this year. Additionally the “petrol” engine share in Europe has gone up too – despite overall lower sales in some important western markets

– making it more difficult to draw metal away from these automobile markets towards China.

Both the aforementioned factors lead us to be-lieve that prices will not fall in the medium term.

Ruthenium continues to attract good buying as well as selling interest. As such the price has not moved. Iridium’s price has also remained unchanged however the metal has seen much lower interest.

and turned it around for a fresh run towards the psychologically important level of $ 300 an ounce, however buying interest was not strong enough to take it to this mark.

With the “wreckage premium” no longer avail-able, perhaps professional market participants as well as industrial end-users at the moment fear a relapse in important automobile markets like Germany and the USA, which in turn would mean lower demand and consequently lower prices.

Even though we are generally positive for palla-dium, for the moment we would advise industrial end-users to wait-and-see; the current situation appears to be too unclear to undertake hedging operations at present levels.

Like in the case of gold, stocks in the two palla-dium ETFs were significantly up in the past few days. ETF Securities alone added around two tonnes to its stocks last week and almost an-other tonne in one day yesterday. The ETFs of ZKB and EFT Securities now have over 1 mil-lion ounces of the white metal bound to their products; twice as much as 18 months ago, at the height of the multi-year price rally.

In the past few days palladium price itself has not really benefited from any success stories from the investor side nor has the end of the strikes in the second most important producer nation South Africa made much of a difference. Good demand did however prevent the metal from dropping below $ 278 an ounce last week

Rhodium, Iridium, Ruthenium

AU US$/oz €/oz €/gram

High 1007.50 692.92 22.28

Low 943.80 649.11 20.87

Latest 990.00 680.81 21.89

370.82

316.04

AG US$/oz €/oz €/kilo

High 16.77 11.53 370.82

Low 14.29 9.83 316.04

Latest 16.40 11.28 362.63

In the past ten days silver again let itself be lead by gold as it climbed to this reporting periods peak of $ 16.81 an ounce; it’s highest since the general rally of early last year. Here also it is not industrial demand that is driving the price; ac-cording to traders, this demand sector is currently as good as “dead”.

Recently the longer-term inclined demand in form of ETFs has also been cautious (a humble plus of 8 tonnes last week) and bars too, in contrast to gold, are hardly being sought after. In contrast to this, last week primarily speculative long posi-

tions to the tune of about 80 tonnes (a plus of 10 per cent) have been added on the Futures Exchanges.

As far as the outlook is concerned, a lot de-pends on whether further increases in gold price will push silver above the $ 17 an ounce mark. In this case an important chart point would be broken and the white metal could subsequently develop its own dynamics. On the other side, a slide to below $ 16.35 an ounce would send out a negative signal.

Silver

10 September 2009 Page 3

Gold the last two quarters of 2008 and earlier this year and jewellery demand still at the bottom. This week latest figures were reported from the Indian and Turkish markets. As per a representative of the Bombay Bullion Market, the Indian sub-continent – the most important physical (jewellery) market for gold – recorded 85 per cent less demand in August as compared to similar period previous year. Also figures for the year (to date) are no better: between January and August only 84 tonnes of gold were imported into India; 68 per cent less than in previous year. However other Indian import figures were also published last week. The producer’s lobby-organisation, The World Gold Council, said that July imports this year were 8 per cent more than in previous year and that August also recorded a plus. Local analysts commented that the different sets of figures are hardly comparable and that each of the two organisations was representing its differing interests. However all observers were of the same opinion that the tonnage for the full year (to date) was significantly lower; even the WGC pointed to a minus of 55 per cent.

In Turkey, world’s third most import sales mar-ket, imports in August were down to 12.5 tonnes; a minus of 74 per cent compared to previous year. For the full year (to date), the drop in ton-nage is even more, namely 77 per cent lower.

On the other hand, at the moment, especially at the currently high prices, supply appears to have increased significantly. Since the price has hov-ered above the $ 990 an ounce mark, our col-leagues in Hong Kong have noticed good quanti-ties of gold scrap coming back to the market.

After falling for quite a long time, a (slight) in-crease in production was reported from the once largest gold producer South Africa. The jump to 51.6 tonnes in the 2nd quarter was a marginal plus of 0.4 per cent vis-à-vis the 1st quarter how-ever this years’ production to date is still off by 9.3 per cent compared to similar period previous year. Already in 2008, production had fallen to an 86 year low; South Africa has since dropped to third place in the list of global producers, after China and the USA.

In connection with new production, representa-tives of the Australian mining company Focus Minerals gave their assessment day-before-yesterday that the higher prices will lead to sig-nificant increase in local production. Thanks to high gold prices, Focus itself is planning to dou-ble its production in both the coming years.

After an initial sideward move around the week-end two weeks ago, gold gathered itself and on Wednesday last week broke through a very im-portant chart point of $ 960 an ounce – men-tioned in our previous report – as it set sail, as expected, for the $ 1,000 an ounce mark.

This mark – also psychologically very important – was breached this Tuesday as the yellow metal traded up to $ 1,007.50 an ounce; slightly above this years’ high of $ 1,005 an ounce re-corded mid-February.

In this most recent rally gold seems to have decoupled itself from the usual influence of the oil price and the US-dollar. The US-dollar did significantly lose against the euro – at times down to as low as 1.46 – however this clearly happened after gold recorded strong gains.

World’s largest gold producer Barrick Gold’s declaration of its intention to issue $ 3 billion worth of fresh shares and to use the cash gener-ated to close-out its hedge book (still comprising of 9.5 million ounces of gold) has for sure also helped the gold price. Barrick expects further rising gold prices and wants to be fully exposed to a rising value. As a result the miner will of course be vulnerable to falling gold prices, but that is a risk that it is apparently willing to take.

As far as the metal holding above the $ 1,000 an ounce mark is concerned, there are a number of analysts who are sceptical. UBS for example has warned in a daily commentary against buying gold at current levels (“Don’t buy gold at $ 1,000”). However there are other opinions too: Standard Bank expects the price to get to $ 1,100 at some stage and two hedge-funds this week foretold (possibly keeping here also their own interest in mind) prices of $ 1,250 and $ 1,600 an ounce respectively.

We believe a lot will depend on the movement in the next couple of days. Should the metal again – its third effort within 1 ½ years – not durably manage to establish itself above the $ 1,000 an ounce mark, then it could well happen that one or the other longer-term inclined investor may decide to divorce himself from the yellow metal. The price would then surely come under severe pressure. As such it is going to be interesting to see how the ETF positions behave in the coming weeks.

Fundamentally, as mentioned in our previous report, there is not much positive happening for gold anyway. Industrial demand continues to stay lacklustre, physical demand for investment bars is not too bad but way off its highs sees in

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To open the link click on the headline.

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