Another constructive day for the precious metals bulls yesterday, with gold nudging above $1,690 and silver trading at $32 and change. Platinum is mirroring gold, albeit with slightly less volatility at the moment, while palladium also put in a strong performance, gaining over $13 early in the New York pit session.

Supply concerns relating to difficulties in the South African mining sector, twinned with expectations of increasing demand from Chinese and American car manufacturers propelled palladium to its biggest quarterly rise in two years during Q4 of 2012. South Africa’s Business Report quotes Deutsche Bank’s Daniel Brenber, who expects to see a falling platinum/palladium price ratio in the coming years, and notes the potential for “a million-ounce [supply] deficit” this year “and in the following years.” Reuters quotes analyst expectations of an average-platinum price of $1,700/oz – up 10% from last year’s average – with palladium expected to average $745/oz, a gain of 16% on last year.

Of course, platinum and palladium prices – along with silver and the wider industrial commodities complex – are heavily dependent on inflation expectations. Increasing optimism and improving indicators from major economies will boost platinum and palladium, but it pays to consider alternate scenarios. We will be releasing a podcast interview soon with Mike “Mish” Shedlock of Sitka Pacific Capital, in which Mish outlines why he believes deflation rather than inflation will be the major threat facing major economies in the years ahead, and the implications of this for precious metals holders.

Quiet on the eurozone front continues to benefit the euro, and is focusing attention on economic problems across the Channel. “Eurozone stability leaves sterling exposed”, says the FT ($) front-page headline, with the paper quoting one fund manager who reckons “sterling is in the process of losing its safe haven status”. The steady drip of disappointing borrowing figures are not helping. Friday’s Q4 GDP report will be important.