Palladium breaks US$1,500 barrier in record run; gold rises

Ingots of 99.98 and 99.97% pure palladium are seen at the Krastsvetmet non-ferrous metals plant in the Siberian city of Krasnoyarsk, Russia, Nov 22, 2018. (Reuters pic)

LONDON: Palladium briefly surpassed the US$1,500 mark for the first time to touch a record high due to tight supplies and gold topped a 10-month peak on hopes of a US-China trade truce, as investors awaited clarity on US monetary policy.

Spot palladium, which traded as high as US$1,502 per ounce, was up 1.3% at US$1,498.56 at 1127 GMT.

“There is a lack of supply in the market and demand is very high,” said Afshin Nabavi, senior vice president at MKS SA, citing lack of supplies from major producers Russia and South Africa.

The supply deficit is likely to widen this year as stricter emissions standards increase demand for catalytic converters, autocatalyst manufacturer Johnson Matthey said last week.

“Environmental requirements are getting stronger, which means more palladium is needed in (manufacturing) a car,” said Yuichi Ikemizu, Tokyo branch manager at ICBC Standard Bank.

The autocatalyst metal is additionally supported by the fact that broad-based substitution from palladium to platinum was not immediately feasible, analysts said.

Both metals are primarily consumed by automakers in catalytic converter manufacturing, but platinum is more heavily used in diesel vehicles that have fallen out of favour since the Volkswagen emissions-rigging scandal broke in 2015.

Unlike platinum, palladium has benefited from a switch to petrol engines and expectations for growth in hybrid electric vehicles, which tend to be partly gasoline-powered, helping cushion the metal from falling global car sales.

Indicative of the bullish sentiment, net long positions in palladium have jumped since August last year, with prices rising about 80% during the same period.

Meanwhile, spot gold hit its highest since April 19, 2018 at US$1,346.73 per ounce and was up 0.2% at US$1,344.03. US gold futures also rose 0.2% to $1,346.90.

“Hopes for a deal between the US and China and the US dollar, which is slightly lower, are offering support to the metal,” said ABN AMRO analyst Georgette Boele.

US President Donald Trump on Tuesday said trade talks were going well and suggested he was open to extend the Mar 1 deadline for a deal.

The dollar fell as traders positioned ahead of the release of minutes from the Fed’s last meeting later today.

Investors will scan the minutes for more guidance on rate increases this year. Higher rates tend to weigh on non-yielding gold.

On the technical front, “the next psychological level is US$1,350, but what is more important is that gold breaks above the US$1,365 level,” Boele said.

Among other precious metals, platinum was up 0.6% at US$822.49 per ounce, while spot silver was up 0.3% at US$16.03.