Palladium Rises to 13-Year High on Supply Concerns as Gold Drops

Aug 18, 2014 2:35 pm ET

Aug. 18 (Bloomberg) -- Palladium futures climbed to a 13- year high on concern that global supplies will trail demand for the metal used in pollution-control devices in cars, exacerbating a deficit. Gold fell.

This year, palladium jumped 25 percent following a five- month mine strike that ended in June in South Africa, the world’s second-biggest producer. The conflict in Ukraine spurred the U.S. and European Union to impose sanctions on Russia, the top supplier.

Production will trail demand this year by the most ever after the strike, according to London-based Johnson Matthey Plc, which makes a third of the world’s catalytic converters. This month, holdings in exchange-traded funds backed by the metal rose to an all-time high.

“Concern about supplies continue to drive the market, and it will continue to be the star performer of the year,” Bart Melek, the head of commodity strategy at TD Securities in Toronto, said in a telephone interview. “With all the tensions in Russia, it’s very possible that at some point supplies will affected from the country.”

Palladium futures for September delivery rose less than 0.1 percent to settle at $894.90 an ounce at 1:14 p.m. on the New York Mercantile Exchange. Earlier, the price reached $902.75, the highest for a most-active contract since Feb. 22, 2001. The metal climbed for the ninth straight session, the longest rally since July 8.

Trading was 27 percent above the average for the past 100 days for this time, data compiled by Bloomberg showed.

Platinum futures for October delivery declined 0.8 percent to $1,446.20 an ounce, the fourth straight decline.

Auto Sales

U.S. sales of cars and trucks increased 9.1 percent in July, heading toward the best year since 2006, as automakers benefit from stronger consumer confidence, payroll gains, low- interest rates and pent-up demand for new vehicles.

“Palladium has very good fundamentals,” Robin Bhar, an analyst at Societe Generale SA in London, said in a telephone interview. There are “potential threats on Russian exports. The aftereffects of the South African strike means output will suffer. There’s a sense that China and U.S. car sales remain buoyant.”

European leaders are pushing to halt the conflict that has fractured Ukraine since Russia annexed Crimea in March. Russia has retaliated against sanctions by banning imports of some products from the EU, U.S., Norway and Canada.

Gold futures for December delivery fell 0.5 percent to $1,299.30 an ounce on the Comex in New York. On Aug. 15, the price touched $1,293, the lowest since Aug. 6.

Silver futures for September delivery rose 0.6 percent to $19.635 an ounce. Earlier, the price touched $19.47, the lowest since June 17.

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--With assistance from Alan Ohnsman in Los Angeles.