Palladium’s hot run turns cold in meltdown

During market crashes, palladium isn’t the first commodity that comes to mind.

That’d typically be reserved for gold, the oldest of all safe havens, or maybe oil, a notoriously volatile asset. But while those two have garnered plenty of attention this week, no commodity has cratered more spectacularly than palladium, stunning investors with a 30- percent plunge that included a 20- per- cent drop in one day alone in the spot market. Futures on Friday tumbled as much as 24 per cent.

Palladium’s dramatic ascendance in the past 13 months has turned into an equally shocking rout as the coronavirus outbreak crushes demand prospects for the metal used in cars. After fears of supply constraints sent palladium cruising through multiple record highs, making it one of the best performing commodities of 2019, concerns about auto sales sent the metal plunging into a bear market. And the fall continued Friday.

“Palladium’s sell- off yesterday was really just a good reflection of the overall panic in the market,” Ole Hansen, head of commodity strategy at Saxo Bank A/ S, said by phone Friday. “I think it’s pure and simply telling the story of a typical CTA or a hedge fund — they are selling the momentum.”

Palladium made a U- turn after surging by more than half last year, the most in a BNP Paribas gauge of commodity returns. By Friday, spot prices were down about 12 per cent this year.

The difference between the high and low on Thursday was US$663.57, the most in records going back to 1993. The unravelling comes

CONCERNS ABOUT AUTO SALES SENT THE METAL PLUNGING.

after the metal surged 88 per cent in 12 months to an alltime high in late February.

Hansen says investors are probably still bullish on palladium’s fundamentals.

The market, largely reliant on Chinese auto sales, has been hit by expectations of weaker industrial demand and weaker car sales as consumers stay home amid the spread of the coronavirus globally.