Platinum Extends Losses on Volkswagen Scandal, While Palladium Shines – by Ese Erheriene and Tatyana Shumsky (Wall Street Journal – September 23, 2015)

Gold prices carved out a slight gain on the back of a weaker dollar

Platinum prices fell closer to a seven-year low on Wednesday, while palladium rallied, after some investors wagered the Volkswagen AG emissions scandal would crimp demand for one metal while boosting use of the other.

Revelations that German car maker Volkswagen used software in its diesel-powered vehicles to cheat on U.S. emissions tests have rattled the precious metals industry, stirring debate over the likely impact on future demand for emissions control technology that relies on platinum and palladium.

Known as auto catalysts, these exhaust filters have a higher platinum content in diesel-powered cars, and have a higher palladium content in gasoline-powered vehicles.

“People are looking at the VW scandal and thinking this could be very positive for the gasoline (car) market,” said Erica Rannestad, senior analyst with GFMS. “They’re making a bet that there’s going to be a decline in diesel sales and this will benefit gasoline demand.”

The auto industry accounted for about 40% of global platinum demand and 69% of global palladium demand in 2014, according to data from Johnson Matthey PLC, which makes platinum and palladium chemical-coatings for car companies.

The most actively traded platinum futures contract, for October delivery, fell $5.10, or 0.5%, to settle at $932.40 a troy ounce on the New York Mercantile Exchange. This was the lowest close since January 2009.

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