6-Month Prices For Platinum And Palladium

Source: Kitco.com

Last week, prices of both platinum and palladium climbed to their highest levels since November 2008-buoyed, in part, by the announcement of General Motors' bankruptcy.

If it seems odd that the bankruptcy of a huge customer would be good for a commodity, that's understandable. As we've talked about before, the majority of platinum and palladium demand - 60% last year - stems from automobile manufacturers, who use the precious metals to construct catalytic converters (the parts that clean up toxic exhaust fumes). And according to a recent report by industry researcher Johnson Matthey, platinum demand for auto catalysts dropped 8.2% last year alone. Should GM get bogged down in drawn-out bankruptcy drama, you'd expect demand to plummet even further.

So why are prices rising? Like all precious metals, platinum and palladium have seen a significant boost recently from investors looking for hedges against the increasingly likely threat of inflation. But hope, too, has made a difference: So far, GM's bankruptcy has proceeded swiftly, spurring optimism that the world's second-largest automaker can make quick work of its bankruptcy and reemerge stronger and more competitive than before. If it does so, then auto demand too might soon recover - as well as demand for palladium and platinum.

Already some signs of rejuvenation have begun to appear in global auto demand. In April, car purchases were way up in Brazil, India, even Canada. Chinese drivers in particular can't seem to get enough cars; passenger vehicle sales, encouraged by tax cuts and subsidies, skyrocketed 47% last month, the largest increase since 2006.