Palladium demand receives a boost on expectations Chinese auto sales may accelerate 8% in 2013. China’s demand for automobiles has surged in recent years as rising per capita wealth combined with a large and growing urban population has led to a structural increase in auto demand. Palladium is a key component of autocatalysts used in the gasoline-engines which are predominant in the US and China. Rising China and US growth and high global liquidity will likely benefit palladium, relative to platinum, assuming that key economic tail risks are averted.

Chinese vehicle sales improve, providing a boost to palladium demand. Vehicle sales rose 4.3% in 2012, up from 2.5% in 2011. The China Association of Automobile Manufacturers expects sales to rise 7% in 2013. While the improvement does not match the double-digit growth seen in 2009 and 2010, the steady improvement is consistent with a soft-landing of the Chinese economy. Palladium is a key component of autocatalysts used in the gasoline-engine dominated auto markets of the US and China. With both US and China growth showing signs of recovery, palladium demand will likely benefit.

Key events to watch this week: BoJ rate announcement. The BoJ and Abe’s LDP party are expected to be considering making an open-ended commitment to assets buying activities until the 2% inflation target is in sight. If this were to happen, gold would likely benefit from the additional stimulus. [Japanese Yen ETF Weakens on Asset Buying Talk]

ETFS Physical Platinum Shares (NYSEArca: PPLT)