Palladium eases slightly but still near record high

Bengaluru — Palladium prices retreated on Tuesday as investors booked profits from a record run that took the metal to within striking distance of $2,000 an ounce for the first time, with an interim US-China trade deal driving prospects for higher demand.

Palladium was down 0.8% at $1,962.58 an ounce at 1.47pm GMT, slipping from an all-time high of $1,998.43 hit earlier in the session.

“Supply is tight and when you’re adding the speculation about a potential pick-up in demand due to recovery in the global economy, you have a perfect storm of bullish news continuing to keep palladium supported,” Saxo Bank analyst Ole Hansen said, adding that the move to the psychologically important $2,000 level had prompted some profit-taking.

However, he added: “Liquidity is poor, which means that if we see a correction, it can be quite brutal and could take palladium back down towards $1,850, although there are no signs of that right now.”

A phase-one trade deal between the US and China has been “absolutely completed”, a top White House adviser said on Monday. However, Chinese officials have been more cautious, saying the dispute has not been completely settled.

Palladium has risen about 56% in 2019 on a sustained supply squeeze, and has been constantly breaking records despite a weakening global automotive sector.

“We look set for an imminent test above $2,000,” MKS Pamp said in a note. Elsewhere, gold prices were steady amid uncertainty driven by a lack of concrete details about the interim trade deal.

Spot gold and gold futures were at $1,476.59 an ounce and $1,481.10, respectively.

The trade dispute will be an influencing factor for gold throughout 2020, said Commerzbank analyst Daniel Briesemann, adding that a phase-two deal would be much more difficult since a lot of critical issues had been left out of the current agreement. “We must be prepared for some volatility and uncertainty. It’s not yet a done deal.”

Gold, considered a safe investment during political and economic uncertainty, has gained about 15% in 2019, mainly driven by the 17-month-long tariff war and its impact on the global economy.

Also supporting bullion, European stocks slid from record highs on reports that Britain’s prime minister is ready to play rough in Brexit talks, souring sentiment after a record rally during the Asian session.

Silver was little changed at $17.02 an ounce, while platinum fell 0.1% to $928.31. 

Reuters