Palladium extends record run on supply shortfall

[BENGALURU] Palladium soared to an all-time high on Tuesday, extending a record run driven by concerns of a shortage of the metal used in emissions-controlling devices for automobiles.

Palladium was up 1.2 per cent to US$3,007.66 per ounce at 11.36am GMT, after jumping to a record of US$3,017.18.

Prices of the autocatalyst have jumped about 21 per cent since mid-March when top producer Nornickel announced disruptions at two mines, exacerbating market concerns about a shortage.

"Palladium lives in its own world with low liquidity and strong momentum potentially taking it higher still," said Ole Hansen, head of commodity strategy at Saxo Bank, adding however, the metal may be at risk of a price correction, "especially if it fails to hold onto the US$3,000 mark."

Chronic undersupply shot prices from around US$500 an ounce in 2016 up to US$2,875.50 just before the coronavirus outbreak began.

A shift to electric vehicles may eventually erode demand, but tightening environmental rules have forced carmakers to use more and more palladium in gasoline engines.

Gold, meanwhile, retreated on a stronger dollar.

Spot gold was down 0.6 per cent to US$1,782.45 per ounce, after hitting its highest since Feb 25 at US$1,797.75 on Monday.

Carlo Alberto De Casa, chief analyst at ActivTrades, said technical factors were pressuring gold, while "the US dollar's recovery is making it more complicated".

"We have two important support levels at US$1,765 and US$1,750, while a clear surpass of US$1,800 would open up space for bullion."

The dollar index rose 0.4 per cent as investors weighed chances that US interest rates will be forced higher by a roaring US economic recovery, reducing bullion's allure for other currency holders.

Higher interest rates increase the opportunity cost of holding non-yielding bullion.

Investors await US services data on Wednesday and April payrolls on Friday.

Silver was down 0.2 per cent at US$26.83, after hitting its highest since March 1 on Monday, while platinum rose 1 per cent at US$1,241.95.

REUTERS