October 23, 2018 / 2:40 PM / 24 days ago

Palladium hits record high, in sight of parity with gold

BENGALURU (Reuters) - Palladium soared to a record high on Tuesday, bringing the metal to within striking distance of achieving parity with gold after it outshone other precious metals including its closest rival, platinum, this year.

FILE PHOTO - A tray with palladium ingots prepares for final weighing and packaging in a room at the Krastsvetmet plant in the Siberian city of Krasnoyarsk November 16, 2009. REUTERS/Ilya Naymushin

A combination of factors, from tight supplies and large deficits to resurgent interest from speculative investors, has kept the platinum group metal (PGM) on the boil.

Used mainly in emissions-reducing autocatalysts for vehicles, palladium has gained some 7 percent so far this year to hit a record $1,150.50 an ounce on Tuesday, less than $100 away from the price of gold.

(Graphic: Palladium rises above platinum, closes in on gold - tmsnrt.rs/2OIM4wJ)

Some analysts attributed the latest jump to concerns that Russia, the main producer of the metal, could restrict supplies in response to the United States’ plans to withdraw from the Intermediate-Range Nuclear Forces Treaty.

The prospect of additional stimulus in China, a major consumer of palladium, is also driving prices higher, according to analysts.

In what has been perceived as a move to spur growth in one of the world’s largest economies, the Chinese government published a draft of a new rules and tax cuts on Monday.

“News out of China in the last few days has helped all the industrial metals and that flows through into palladium, which is the most industrial metal of the precious metals complex,” Societe Generale analyst Robin Bhar said.

Palladium has outperformed other precious metals recently, having registered an increase of more than 35 percent over the past seven weeks, compared with single-digit gains in gold, platinum and silver.

It has also attained its biggest premium over platinum, used in autocatalysts for diesel cars, since 2001.

Julius Baer analyst Carsten Menke said in a note that the jump was due to hopes that the new economic measures would stimulate Chinese auto markets.

“With demand dominated by catalysts of gasoline-fuelled cars, palladium is highly exposed to the Chinese car markets, which had been softening as of late,” Menke said.

“For palladium, the uplift in sentiment would arguably matter more than the uplift in sales, skewing short-term price risks to the upside.”

However, he said he was skeptical about the rally’s sustainability.

On the technical front, charts show the metal has also moved into overbought territory, indicating a possible correction.

( For a graphic on the platinum/palladium ratio: tmsnrt.rs/1QjSZAC )

Reporting by Arpan Varghese and Swati Verma in Bengaluru; Editing by Veronica Brown and Jan Harvey

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