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Palladium creeps closer to Gold price

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NEW YORK (Scrap Register): Palladium prices hit a record high on Thursday and at one point were within $30 an ounce of gold, Commerzbank said, although the spread has since widened again.

Nevertheless, palladium’s recent gains may have been “excessive,” Commerzbank said. “We attribute the price surge – which happened very quickly – to buying on the futures market, as the trading volume yesterday was twice as high as on average in recent months.”

In a small, partly illiquid and still very tight market, this buying caused the price to react accordingly. The fact that lease rates are still high reflects the tightness on the market, even though palladium ETFs [exchange-traded funds] have seen hardly any more outflows in the last three weeks.

“We regard the price rise – palladium has soared by nearly 40% since mid-August – as excessive. Thanks to its strong upsurge yesterday, the palladium price has come to within a good $30 of the gold price for a time, something we would not have believed possible just a few months ago,” Commerzbank added.

The spread has widened back to around $65 early Friday, basis the spot market. In the futures market, December palladium peaked Thursday at $1,161.50 an ounce.

Commerzbank analysts commented that clouds over the auto market, which uses palladium for catalysts, “are becoming darker and darker” after weaker car sales in the China and European Union lately, in addition to a decision by the Chinese government against halving the purchase tax for cars.

“Given that the Chinese auto market is gasoline-dominated and may well see the first decline in sales for the year as a whole in over 20 years, palladium demand shouldn’t really increase in the next few months,” Commerzbank noted.

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