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Palladium Tops $1K, Surging To 16-Year High

Kitco News

(Kitco News) - Palladium prices early Monday topped $1,000 an ounce for the first time since 2001 in a market that is in backwardation, which is seen as a sign of tight supplies, traders and analysts said.

Spot palladium traded just above $1,009 an ounce before backing off. The metal was up $11.40 to $999.65 as of 10:43 a.m. EDT. Palladium’s premium over platinum had widened to around $55 an ounce. At the session high, spot palladium was 49% higher for the year to date.

“There seems to be a bit of shortage for the metal at the moment,” said Afshin Nabavi, head of trading at trading house MKS (Switzerland) S.A.

He pointed out that palladium remains in backwardation, in which the price for the front-month contract is higher compared to deferred months. For any commodity, this is seen as a sign that users are willing to pay a higher price to get metal right away and is generally viewed as a sign of tight market conditions. As of 10:35 a.m. EDT, Nymex December palladium was trading at $996.35, while March was at $991.65.

“There’s too much demand and not enough supply,” Nabavi said.

Commodities brokerage SP Angel said palladium has been boosted by “robust” demand for catalytic converters in gasoline-powered engines. The price of the metal last month fetched more than platinum – used in catalysts for diesel-powered motor vehicles – for the first time in 16 years. SP Angel cited market expectations for a continuing supply deficit in palladium, along with rising demand.

“Not only does demand from the automotive industry appear robust, speculative financial investors are also remaining loyal to palladium,” said Commerzbank.

The most recent positioning data from the Commodity Futures Trading Commission shows that as of Oct. 10, money managers had a net-long – or bullish – position of 21,807 contracts in palladium futures, up from 21,414 the week before.

A number of analysts have suggested in recent weeks that palladium’s outperformance to platinum is likely to abate, commenting that much good news has already been factored into palladium, while platinum could benefit from gains in gold. Still, for now, palladium has continued to roar ahead.

One East Coast desk trader cautioned, however, that the palladium market is “pretty thin,” thus could become increasingly volatile with widening bid/offer spreads.

Palladium traded as high as $1,100 an ounce back in 2001, when Russian-supply issues boosted prices.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.
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