U.S. Auto Makers Driven towards Bankruptcy

By: Mark_OByrne

As auto manufacturers across the globe go to their respective governments, carrying empty fuel tanks hoping for a bail out, the shine has definitely dulled on platinum and palladium.  Tumbling car sales in North America and Europe have contributed to a dramatic shift in investor sentiment towards these metals, which play a vital role in diesel and petrol catalysts in reducing emissions. Johnson Matthey said it expected demand from carmakers in North America for platinum to dip by 36% this year and palladium by 20%. This news coincides with Republican Senators in the US attacking carmaker's pleas for another $25bn bail out on top of the $25bn already in place for the big three US manufacturers.

Senators argued that they should consider bankruptcy protection instead. Their European counterparts have approached Brussels for a €40bn bail out from the European Investment Bank (EIB.) The EIB are planning to produce a proposal before  a 2nd December meeting of European finance ministers, which could prove pivotal. Platinum is currently trading at $829 down from $2290 in March. Palladium is trading at $212 from a high of $540, also in March. Given the economic turmoil and supply cutbacks that are inevitable as a consequence in the Platinum and Palladium markets, pricing is difficult but  a return of risk appetite could see the metals rise to $1400 and $300 respectively over the next 6 months.

A partial retreat by Barclays over their plans to raise £7bn in capital from Middle Eastern investors failed to dampen shareholder anger. The bank had planned to issue £500m of securities to Qatar Holding and Sheikh Mansour Bin Zayed Al Nahyan, a member of the Abu Dhabi royal family, but was forced into a limited retreat after leading investors, including Legal and General and Aviva threatened to vote against the capital raising at next week's shareholder meeting.

However, the limited action has failed to assuage investors furious that the capital raising ignored the pre-emption rights that were designed to protect their investments from dilution and would leave the Middle Eastern investors with nearly a third of the bank. More good news followed when Alistair Darling, the British Chancellor, issued a warning to shareholders in banks that they should not expect favourable treatment if they tried to change their bail out terms.

Fu Chengyu, the head of China National Offshore Oil Corporation said that oil companies expect oil prices to fall due to decreasing demand and will cancel most planned investment projects. A meeting in Beijing predicted that oil could fall to $40 a barrel.

Precious Metals

Gold is currently $735.60 (11.45GMT) down from a close in New York of $740. Silver is $9.48; Platinum $829 and Palladium $212.

By Mark O'Byrne, Executive Director

Gold and Silver Investments Ltd. have been awarded the MoneyMate and Investor Magazine Financial Analyst of 2006.

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