Palladium sets record after record as wider deficit fuels surge

By Ranjeetha Pakiam

Palladium surged above $2,800 an ounce, extending its record-breaking rally on forecasts for a widening deficit. Gold is trading near the highest level since 2013 on concerns over the spread of the new coronavirus and how it’s impacting global growth.

The metal used in catalytic converters is already up more than 40 per cent in 2020 on expectations stricter environmental standards will spur higher loadings of the material in cars, draining global supply that’s already struggling to meet demand. The shortage is set to widen to 1.9 million ounces from 1.1 million ounces last year, according to Anglo American Platinum.


“A deficit equivalent to about 20 per cent of the palladium market is expected to be sustained this year, helping explain the surge in prices,” said Vivek Dhar, an analyst at Commonwealth Bank of Australia. Demand is being driven by environmental regulations, particularly in China, which has increased palladium use in vehicles and should offset any recent weakness in car sales, he said.

Spot palladium jumped as much as 8.4 per cent to $2,849.61 an ounce, an all-time high, with prices climbing about $100 in 30 minutes. The market pared gains to trade 4.3 per cent higher at $2,743.32 by 3 p.m. in Singapore.

The rally may also be driven by stimulus measures in China, as well as expectations high prices are here to stay. “Sometimes investors look for a reason to justify buying an asset even if prices have already rallied massively,” said ABN Amro Bank NV strategist Georgette Boele. “Normally gold and palladium don’t rally like this. This time, they hope it is the new normal.”

Spot gold added 0.1 per cent to $1,603.91 an ounce. Prices had touched $1,611.42 in early January, the highest since 2013, as geopolitical tensions flared. The unfolding health emergency has seen holdings in global exchange-traded funds backed by bullion expand to a record.

Gold investors are assessing the impact of the disease on economic growth and appetite for risk amid speculation that the Federal Reserve will feel increased pressure to reduce interest rates. The U.S. central bank has said the effects of the virus have presented a “new risk” to the outlook and traders will study minutes from the Fed’s latest meeting, due later Wednesday, for any hint of a dovish tone.

Among other main precious metals, silver rose 0.6 per cent and platinum advanced 1.2 per cent.