PRECIOUS-Palladium at 13-year high on lingering supply concerns

Tue Jul 8, 2014 3:41pm EDT

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By Marcy Nicholson and Clara Denina

NEW YORK/LONDON, July 8 (Reuters) - Palladium rose for the 12th straight session to its highest in more than 13 years on Tuesday amid firm automotive demand and continued concerns supplies in South Africa will tighten even after the end of a months-long strike.

Gold turned lower even as the dollar's recent rally faded and investors awaited clearer signs from the U.S. Federal Reserve that it is on track to raise U.S. interest rates next year.

In an otherwise quiet session, palladium hit $873.75 an ounce, the highest since February 2001, taking its gains to 8 percent over the past two weeks since miners in South Africa, the world's second-largest producer, struck a wage deal to end a five-month industrial action that crimped output.

Since then, other smaller strikes have broken out, stoking supply fears.

The metal, mainly used in autocatalysts in automobile manufacturing, has gained more than a quarter of its value since early February, with gains aided by last week's data showing U.S. auto sales at an eight-year high in June.

Later in the session on Tuesday, palladium pared gains and was up 0.4 percent at $869.00 by 3:15 p.m. EDT (1915 GMT).

"We have supply concerns in South Africa and increasing demand in China and U.S., the largest markets for platinum/palladium demand," said Carlos Sanchez, director of asset management for CPM Group in New York.

Gold prices turned lower after U.S. Fed policymaker Jeffrey Lacker said he sees inflation firming this year. Minneapolis Fed President Narayana Kocherlakota later warned that the labor market has a long way to go until the U.S. central bank reaches its goal.

Spot gold fell 0.2 percent to $1,317.43 an ounce, while U.S. gold futures for August delivery settled down 0.04 percent at $1,316.50 an ounce.

The market is awaiting the release of minutes from the Fed's June policy meeting on Wednesday to gauge the central bank's view on interest rates and economic strength.

The dollar eased against a basket of currencies, having touched its highest in almost two weeks in the previous session.

Some traders said a lack of support from physical markets could weigh on prices, however, tensions in the Middle East and Ukraine are ensuring that there is still some demand for gold as insurance against geopolitical risk.

Platinum fell 0.2 percent to $1,488.75 an ounce, turning lower along with other precious metals and U.S. stock markets.

Spot silver edged down 0.4 percent to $20.96 an ounce. (Additional reporting by A. Ananthalakshmi in Singapore; Editing by Marguerita Choy and Meredith Mazzilli)

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