Palladium rises to an all-time high on tight supply outlook

Bengaluru — Palladium rose to an all-time high on Tuesday as the supply outlook tightened further, while gold dipped ahead of an interest rate decision in the US.

Spot palladium hit a record $1,608 an ounce earlier before easing back to trade 0.1% lower at $1,594.58 at 11.19am GMT.

“The story remains the same [for palladium] as long as there is tight supply,” said Saxo Bank analyst Ole Hansen. “There are also stories of Russians potentially cutting supply [of precious metal scraps and tailings] that is adding to a very bullish scenario.”

The trade and industry ministry of Russia, a major producer of the automotive catalyst metal, is contemplating a temporary ban on the export of precious metals’ scrap and tailings from May 1 to October 31 this year.

However, on the technical front, the rally in palladium, which is now in the overbought territory, could fizzle out, said ActivTrades chief analyst Carlo Alberto De Casa.

Both palladium and platinum are used as emissions-reducing catalysts in automobiles, but palladium is used more in petrol engines. However, expectations of alternatives to palladium have not materialised, Saxo Bank’s Hansen said, adding that “even if there is a substitution, it could take months to be implemented”.

Elsewhere, spot gold dipped 0.% to $1,303.58 an ounce, while US gold futures fell 0.2% to $1,303.80 an ounce.

Gold was slightly pressured by a firmer dollar, which garnered some safe-haven demand after overnight news that China is pushing back against US demands in trade talks.

The dollar has been the preferred refuge from the US-China trade spat for investors since last year.

Investors will now keenly eye the US Federal Reserve’s decision on interest rates at 6pm GMT, followed by a news conference by chair Jerome Powell. The Fed is widely expected to stay put on interest rates, shave the number of hikes projected for the rest of the year, and release long-awaited details of a plan to end the monthly reduction of its massive balance sheet.

No surprises are expected from the Fed-front, said Julius Bär analyst Carsten Menke, with impacts on gold expected to remain muted. “We see gold trending sideways for the first half of this year and then we see a renewed strength towards the end of the year when we expect the dollar to weaken.” 

Lower interest rates reduce the opportunity cost of holding non-yielding gold and weigh on the dollar.

Among other precious metals, silver dipped 0.5% to $15.27 an ounce, while platinum gained 0.8% to $852.97 an ounce, having hit its highest since March 4 at $861.33.

Reuters