LONDON (Commodity Online): Precious metals remain well supported despite the net speculative long positions in the futures market being very high. We expect these positions to remain high for the rest of Q4:09. They raise the risk of price corrections. However, we also believe dips should be bought during the next quarter.

China released its September auto sales data this morning. Auto sales rose 83.6% y/y, to 1.015 million units. US auto sales
remain weak after the end of the “cash-for-clunkers” programme; China’s physical demand for PGM has supported the market
over the past year.

It has been by far the largest importer of platinum and palladium over the past 12 months, which is set to continue. At the same time, volumes traded on Shanghai have not fallen much with the latest rally in platinum. The platinum price in yuan has risen from CNY280 at the start of the month, to CNY 307 today — an increase of 10%.

More support to platinum could come from further increases in electricity tariffs in South Africa. Indications are that ESKOM, the South African power utility, will request a tariff increase of 145% over the next three years. We estimate the direct impact on PGM producers’ cost at 12%.

However, there could be a further indirect impact on costs, as wage demands may also rise on the back of higher inflation. Combined with a strong ZAR, we still see support for platinum and palladium from a cost perspective. Platinum support is at $1,342 and resistance at $1,360. Palladium support is at $325 and resistance at $340.

Gold continues to hit new highs, reaching $1,065 this morning. We are still looking for $1,100 although we expect a bumpy ride. Buying the dips remains our preferred strategy. Gold support is at $1,050 and $1,042 and resistance at $1,065 and $1,070. As long as gold pushes higher, silver should follow. We see support at $17.60 and $17.50, with resistance at $18.00 and $18.30.