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Palladium tops US$2,000; market watchers forecast further rise

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Palladium smashed through US$2,000 an ounce to a record as the metal extended a powerful annual advance driven by a sustained global deficit, with market watchers saying the shortfall will be extremely hard to fill.

[SINGAPORE] Sometimes the usual rules may not apply. Palladium smashed through US$2,000 an ounce to a record as the metal extended a powerful annual advance driven by a sustained global deficit, with market watchers saying the shortfall will be extremely hard to fill.

"In most cases, the cure for high prices is high prices, but not for palladium," Tai Wong at BMO Capital Markets, said before the US$2,000 level was taken out. That refers to the notion in raw materials that a rally induces fresh output, triggering the conditions that then roll back the advance.

Palladium has surged to unprecedented levels in 2019 as tighter emissions rules spurred demand for the metal used in autocatalysts, while supply hasn't been able to respond. Citigroup Inc has forecast that the move upward now has the potential to see prices gain to US$2,500 next year.

"There doesn't seem to be any new, ready supply at any reasonable price," Mr Wong said. "So, it could continue to move higher from here, though perhaps with more volatility."

Spot palladium climbed as much as 1.1 per cent to US$2,000.35 an ounce, before trading at US$1,997.62 at 6.11am in London. Prices are 58 per cent higher this year.

Many raw materials gained in this week after the breakthrough between the US and China to forge an initial trade agreement, bolstering prospects for global economic growth and auto demand.

BLOOMBERG