Palladium Jumps On Auto Sector Sentiment
Palladium prices jumped more than 3% on Thursday and were likely driven by increased interest in auto stocks as well as technical buying, according to analysts.
The metal’s futures for May delivery settled 3.52% higher at $802.75, which is near a fresh two-year high set in the end of March. Platinum also posted significant gains on Thursday, rising 1.3% on the day to close at $977.
“Palladium is similar to platinum — it is sensitive to sentiment toward the auto sector. More specifically, it can benefit from swings in the equity markets, particularly toward the automotive stocks. As we are seeing strong stock market gains as well as positive outlook for the U.S. economy, interest in palladium could rise,” Colin Cieszynski, chief market strategist at CMC Markets, told Kitco News.
On Thursday, Tesla announced a voluntary recall of 53,000 Model S and Model X cars built between February and October 2016, citing a parking brake issue.
“One possible driver for palladium’s Thursday gains could be rising interest in the traditional auto stock, as Tesla announces a voluntary recall, Cieszynski said. “It is possible to see people being more interested in traditional auto makers again.”
Even though the recall is related to the parking break, the announcement “impacts sentiment toward the whole company. And more people might consider buying traditional cars.”
Executive producer of ‘The Gold Forecast’, Gary Wagner, also noted that sharply higher prices come “as a net result of U.S. equities in the tech sector rallying to new record highs.”
Other analysts pointed to geopolitical instability as a driving factor. “Palladium follows the precious metals complex, which usually follows safe-haven demand,” Ryan McKay, commodity strategist at TD Securities, told Kitco News.
This week the market saw risk-averse trading in light of geopolitical tensions related to North Korea, Russian, Syria, and French elections.