Palladium hits peak on deficit, while gold rises on Fed policy outlook

BENGALURU — Palladium rose to a record high on Wednesday on increasing demand and lower supply of the metal used in auto catalysts, while gold gained on expectations of a pause in the US Federal Reserve’s rate-hiking cycle.

Palladium jumped to an alltime high of $1,358.50 an ounce (/ oz), and was last up three percent at $1,358. George Gero, managing director at RBC Wealth Management, noted high demand from “the automobile industry using more and more of palladium” and lower supply were pushing prices higher.

The price of palladium, used mainly in emissions-reducing catalysts for vehicles, has risen by more than 60% from a trough in mid-August last year, and overtook gold for the first time in 16 years early in December 2018.

The move higher on Wednesday could also be attributed to short covering, Michael Matousek, head trader at US Global Investors, said.

A sustained period of record palladium automotive demand, with last year’s estimate of 8.5 million ounces, coupled with constrained mine production growth has resulted in demand outpacing supply over much of this decade, Metals Focus said in a note dated Tuesday. “In the long run, we believe that palladium will continue to benefit from exceptionally strong supply/demand, resulting in yet higher prices. However, in the near future, we believe that palladium is due a correction.”

Spot gold rose 0.3% to $1,292.51/oz at 3:42 pm EST (2042 GMT). US gold futures settled 0.4% higher to $1,293.80 per ounce.

“The macro environment still looks very positive for gold, given we expect the dollar to weaken and the Fed unlikely to start hiking rates until the second half of the year,” said Suki Cooper, precious metals analyst at Standard Chartered Bank.

Investors remained concerned as softer data from across the world heightened fears that the global economy is slowing, adding to the appeal for gold, considered a hedge against economic and political uncertainty, analysts said.

Risks to the US recovery, including a partial government shutdown, have broadened hawkish calls among Federal Reserve officials to be patient before raising interest rates again.

Gold tends to gain on expectations of lower interest rates, as they reduce the opportunity cost of holding non-yielding bullion.

This provided gold some underlying support despite a firmer dollar and global equities.

British Prime Minister Theresa May’s government won a confidence vote on Wednesday, with 325 votes versus 306, meaning Ms. May will now press for a consensus over how to proceed with Britain’s departure from the European Union, after her proposed deal was rejected by parliament.

Platinum gained 1.5% to $805/ oz, while silver rose 0.1% to $15.59. — (MARCH CONTRACT)