By Halia Pavliva Oct. 20 (Bloomberg) -- Platinum and palladium climbed in New York on speculation that the Federal Reserve may cut U.S. interest rates to boost economic growth, supporting demand for the metals used in car parts and jewelry. Saying the credit crunch is ``hitting home'' as Americans find it harder to get loans, Fed Chairman Ben S. Bernanke endorsed additional fiscal stimulus at a congressional hearing today. Government efforts to unlock credit markets roiled by subprime-mortgage loan losses won't prompt an immediate economic rebound, he said in a speech on Oct. 15. ``The market is expecting a rate cut of a quarter point to possibly as much as half,'' Miguel Perez-Santalla, a sales vice president at Heraeus Precious Metals Management in New York, said today in a note to clients. ``Until capital flows begin to move more freely, the prospects of any serious recovery in the precious-metals markets look dim.'' Platinum futures for January delivery rose $11.50, or 1.3 percent, to $892.50 an ounce on the New York Mercantile Exchange. The most-active contract fell 12 percent last week, to the lowest closing price since July 2005. The price is down 61 percent from a record $2,308.80 in March. Palladium futures for December delivery jumped $5.55, or 3.2 percent, to $180.05 an ounce in New York. The most-active contract plummeted 56 percent in the third quarter and 34 percent last month, the biggest declines since at least 1986. Investors expect a reduction of at least one-quarter of a percentage point when Fed policy makers meet at the end of this month, based on the price of Fed funds futures. Lower Forecasts UBS AG's forecasts for platinum and palladium are lower than previous estimates because of weakness in the auto industry and lack of investment demand, John Reade, the head of metals strategy in London, said earlier today in a research report. Carmakers account for more than 60 percent of global platinum use, according to metals trader Johnson Matthey Plc in London. ``Platinum-group metals have seen much less price-elastic demand from the jewelry sector and only very limited safe-haven buying, hence their underperformance to big brother gold,'' Reade said in the report. ``With ongoing deleveraging in evidence, much weaker economic growth prospects and the car sector in all sorts of difficulties, it is hard to make a case for any quick bounce back.'' Platinum is expected to trade at $950 an ounce in three months, down from an earlier forecast of $1,400, Reade said. Palladium is expected to trade at $190 an ounce in the same period, down from an estimate of $300, according to the report. ``We would not rule out the chances that platinum could trade at a discount to gold at some point before the end of the year,'' Reade said. Gold Gold futures for December delivery rose $2.30, or 0.3 percent, to $790 on Nymex's Comex division. Sales of light vehicles in the U.S. fell the most last month since January 1991. Platinum lost 50 percent in the third quarter and 31 percent last month, the worst monthly decline since at least 1986. There are ``still some concerns about the automotive sector,'' Frederic Lasserre, the global head of commodities research at Societe Generale SA in Paris, said today in a report. Platinum is ``still waiting for better newsflow,'' while holdings of exchange-traded funds, or ETFs, are ``down a little,'' he said, without adding details. In palladium, ``still bad economic conditions are already priced in now,'' Lasserre said in the report. ``Tentative signs of buying interest may signal a near-term bottom.'' A price spread of about $700 an ounce between platinum and palladium is ``still attractive to consumers and investors,'' Lasserre said in the report. To contact the reporter on this story: Halia Pavliva in New York at hpavliva@bloomberg.net.

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