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Palladium,platinum

seen driven by

Russia election

LONDON: As volatile platinum and palladium prices continued to slide on Thursday, analysts and traders said the next price move hinged on the outcome of Russia's presidential election over the weekend.

With acting president Vladimir Putin likely to win Sunday's vote, industry experts said they expected the precious metals to fall sharply if and when he signed the necessary documents allowing exports from the central bank and state precious metals and gems reserve Gokhran.

"My gut feeling is that there will probably be some price movements but it will be less than we'd have thought, say, a few months ago -- but both will almost certainly fall," said Alan Williamson, analyst at HSBC in London.

Russia is the world's largest palladium producer, accounting for two thirds of the metal mainly used to make catalytic converters for cars. It is also used in jewellery and dentistry.

Russia also produces 20 percent of world supplies of related metal platinum, used in jewellery and in various combinations with palladium and rhodium in autocatalysts.

But erratic Russian export patterns have kept the markets in both platinum group metals (PGMs) highly volatile in recent years.

Palladium prices climbed to dizzying heights of over $800 per ounce in February on tight supplies and surging demand for car catalysts.

But since then profit-taking has erased most of the gains.

Spot palladium was last quoted at $630.00/$670.00 from a $644.05/$674.05 close while platinum was at $480.00/$488.00 from $494.80/$504.80.

"Now the market is just waiting for the real thing -- real selling, real buying and some fundamental moves. It won't be taken in again, it won't be that naive, but it will continue to be volatile," said one London-based dealer.

Traders said one puzzle the market was grappling with was the size of Russia's stockpile of palladium -- estimated at under 300 tonnes -- as it tried to calculate how many exports had unofficially been drip-fed to the market.

Russia maintains great secrecy surrounding trade and all PGM information is a state secret. Consequently, markets jump on the flimsiest of rumours.

"The secrecy has gone on so long it can't be just bureaucracy," said another trader, adding he'd be surprised if the palladium market reacted as sharply as it did last month.

Analysts were agreed both markets would stay volatile but firm, with HSBC's Williamson seeing platinum falling to $425/450 after the election.

While most traders and analysts expected Putin's anticipated victory to trigger price dips, some remained cynical the jittery market would bet on any fast changes in Russia's export policy.

"I don't think the election makes a jot of difference at all," said Ross Norman at Precious Metals Research.

"Putin will almost certainly win, but it's just a simple smokescreen to delay shipments and keep prices where they (Russians) want them."

In a classic squeeze on supply while demand surges, Russia has failed to deliver palladium in the first six months of each year since 1997 through bureaucratic red tape, while virtually no platinum was shipped last year as a result of loose wording in a December 1998 law.

Dealers said supply of palladium and platinum remained very tight, with no hope of increased deliveries from major producer South Africa, where mines and refineries were at full capacity.-Reuters