Palladium rose to a two-month high in New York on speculation rising car sales will boost demand for the metal used in pollution control gear. Gold declined.

Palladium futures are extending a 13 percent rally last week, the most in a year, after four of the six largest carmakers by U.S. sales beat expectations in November. Prices slid to a seven-week low on Nov. 28 as exchange-traded product holdings slumped 22 percent this year. European equities erased their gains after Germany rejected combining the current and permanent euro-area rescue funds.

“You have better U.S. auto sales data,” which is supporting prices, said Bayram Dincer, an analyst at LGT Capital Management in Pfaeffikon, Switzerland. “It looks like a strong liquidation and selling force pressured the market in November, and now it’s catching up again.”

Palladium futures for March delivery gained as much as $19, or 2.8 percent, to $689.90 an ounce, the highest price since Sept. 22, on the New York Mercantile Exchange. They were at $675 by 8:01 a.m. local time, set for an eighth consecutive increase. Immediate-delivery palladium rose 0.6 percent to $674.50 in London.

The metal dropped 16 percent this year and ETP assets slid to 53.3 metric tons on concern that slowing economic growth will curb consumption. Car sales will rise 6.5 percent to a record 79.5 million cars and light commercial vehicles in 2012, according to LMC Automotive Ltd., a research company in Oxford, England. Barclays Capital anticipates a shortage of 272,000 ounces next year, compared with a surplus of 760,000 ounces in 2011, as demand from automakers gains 5.3 percent.

Auto Sales

“More positive economic indicators and auto sales from the U.S. may help push palladium toward $740,” which would be the highest in almost three months, James Moore, an analyst at TheBullionDesk.com in London, wrote today in a report. “Gold for the moment appears comfortable holding ground between $1,700 an ounce and $1,755.”

Bullion for February delivery declined 0.4 percent to $1,725.70 an ounce on the Comex in New York. Immediate-delivery gold was 0.3 percent lower at $1,723.32 in London.

Bullion is in the 11th year of a bull market and futures reached a record $1,923.70 an ounce on Sept. 6 as investors sought to diversify away from equities and some currencies. Holdings in gold-backed ETPs gained 3.8 tons to an all-time high of 2,358.2 tons yesterday, data compiled by Bloomberg show.

Gold’s 21 percent gain this year has pushed its premium to platinum to 13.5 percent in London. That’s the most since at least 1987, data compiled by Bloomberg based on closing prices show.

Platinum for January delivery in New York was 0.3 percent lower at $1,519 an ounce. The metal is also used in auto catalysts. Silver for March delivery declined 1.2 percent to $32.365 an ounce.

To contact the reporter on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net

To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net

Source: http://www.bloomberg.com/news/2011-12-07/palladium-climbs-to-two-month-high-on-automotive-demand-gold-is-steady.html