Precious metals jostled by reported reserves

In the Lead: “Secrets Exposed. Burn After Reading.”

Precious metals prices opened mixed on Tuesday with gold and silver retreating a bit while platinum and palladium staged advances. Spot gold was quoted at $1,791 per ounce, down about $5 while silver fell 15 cents to the $34 bid level per ounce. A $2 gain was noted in platinum (quoted at $1,658) while palladium moved $13 higher to reach $673 per troy ounce. Rhodium remained static at $1,675 per ounce on the bid-side.

The noble metal palladium (still our favorite medium-term play) partially benefited from recent robust GM and Toyota car sales figures coming out of China and partially from the replay of the story that Russia’s state-owned palladium reserves are running out. In late October a Ministry of Finance official told the media that 2011 is likely to be the last year during which Russia will make any “substantial” palladium deliveries from its state-run Gokhran depository.

The size of the Russia’s palladium stockpile has always been kept secret. Our good friend, Marketwatch’s Laura Mandaro interviewed Anton Berlin of Norilsk Nickel about palladium’s market fundamentals and the current situation with Russia’s inventory. Mr. Berlin covered recent supply and demand facts as well as some of the many interesting applications that this unique metal is sought for. The conclusion is that palladium is either already in a deficit situation or shortly headed into one and that its price prospects are possibly brighter than those of gold or silver, going forward.

Speaking of well-kept secrets, something else that folks cannot get an official handle on, is the location of Germany’s gold reserves. Don’t bother with your “Near Me” app; the Bundesbank has not placed any little yellow pins on the world map to let you know where its billions in bullion are stashed. The subject of Germany’s 3,401 tonnes of yellow metal was recently raised at European debt crisis meetings and some (France) appear to be pressuring the country to ‘mobilize’ part of the hoard to help with the fast-deteriorating situation. German officials fired back, saying that its gold reserves (second largest in the world after the USA’s) cannot/will not be part of any such discussions.

On the other hand – unwillingness to disclose the address (US or German) of the bullion notwithstanding – the German central bank fired a huge hole into the gold conspiracy camp’s listing ship when it categorically stated that “No [German] gold is on loan” and it also implied that albeit “a large share” of the country’s reserves are indeed on German soil, a [potentially larger] portion is also very likely domiciled in New York, in London and in Paris for cost, security and liquidity reasons.

More than sixty global central banks are thought to keep gold reserves in New York, so Germany also keeping some bars there should not come as a surprise to anyone, certainly not when one considers the fact that the country actively sought out that storage location when the threat of the Soviet Union making a grab for it was very real in the 1950s and 1960s. As recently as 2004 the Bundesbank’s chairman Hans-Helmut Kotz indicated that the bulk of his country’s gold holdings were still parked with the FRB in New York. So much for secrets and mysteries.

In the market background this morning, the US dollar lost a marginal amount of ground on the trade-weighted index, slipping to the 76.88 level as the euro held ground based on some resurging optimism that the European crisis might be alleviated by a combination of changing governments and an enhanced rescue fund. The Swiss franc was seen falling fairly hard yesterday in the wake of renewed posturing by the Swiss National Bank that it stands ready to intervene if the cap at 1.20 franc/euro shows signs of having to be “defended.”

Crude oil traded 58 cents higher at $96.20 per barrel while copper added 0.20% this morning. Dow futures were on the rise as investors on this side of the ocean eyed Italy for the latest twist and turns in the seemingly interminable European debt saga. Speaking of black gold, it traded at its highest level in more than three months ($96.60) in New York while over in London the December Brent variety traded at $116 per barrel.

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