Precious metals remained under pressure last week as a narrowing US deficit helped the US dollar appreciate and sent most precious metals (in dollar terms) lower.

Many investors in gold and silver ETPs continued to rotate into equities despite mixed cyclical signals. Meanwhile the Reserve Bank of India added a further obstacle to gold-hungry Indian consumers by restricting the ability of banks to import gold on consignment (meaning that they will only be able to import gold to fulfil a specific customer order from now on).

The only bright spot in precious metals came from palladium which continued to rally on growing supply deficit expectations. As market participants from around the globe gathered in London for Platinum and Palladium Week, there is a growing consensus that the palladium deficit in 2013 will be meaningful. [Gold, Silver Miner ETFs Fall 10% in Week]

Johnson Matthey confirms the platinum and palladium deficit of 2012 and points to a further deficit in palladium in 2013. Palladium is set to see supplies tighten this year as gasoline autocatalyst demand from the US and China continues to grow and Russian state stocks diminish further. JM’s outlook for platinum is strained by still poor diesel autocatalyst sales in Europe and weaker jewellery demand, while recycling activity could pick up. European auto sales may have reached a bottom however, with April sales showing the first increase in 18 months. Sales are currently hovering near a 17 year low and austerity-fatigued consumers of Europe will probably need to see more balance-sheet restructuring before they quicken their pace of car purchases.

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