Palladium hits new high on supply crunch

Bengaluru

PALLADIUM rose to a record high on Thursday on lower supply concerns and rising demand for the metal used in auto catalysts, while gold held steady as a firmer dollar offset expectations of a pause in US rate hikes.

Spot palladium rose as high as US$1,366.50 per ounce before slipping back to trade steady at US$1,360.50, and has risen nearly 8 per cent so far this month.

Spot gold was steady at US$1,292.51 per ounce, while US gold futures dipped 0.1 per cent to US$1,292.40 per ounce.

"Congressional pushback on efforts to ease US sanctions against Russian metals producers, the world's top source for palladium, has probably helped drive supply shortage worries," said Ilya Spivak, senior currency strategist with DailyFx.

The price of palladium, used mainly in emissions-reducing catalysts for vehicles, has leapt more than 60 per cent since a trough in mid-August. Prices for the metal overtook gold for the first time in 16 years late last year.

Many members of Congress have been questioning the US Treasury Department's decision in December to ease sanctions imposed in April on certain Russian companies.

A firmer US dollar meanwhile kept a cap on gold.

"The dollar is quite strong and acting as a resistance for a breakout in gold," Argonaut Securities analyst Helen Lau said.

Gold has gained for five straight weeks, but prices have been hovering around a US$20 range for the past two weeks and have been unable to break through a strong technical resistance at US$1,300.

"Gold's recent standstill seems to reflect the clouded US growth outlook, and uncertainty about the path forward for Fed monetary policy," said Mr Spivak.

Risks to the US recovery, including a self-imposed government shutdown and volatile stock markets, have made several Federal Reserve officials call for patience before raising interest rates again.

The White House estimated the government shutdown is costing the American economy 0.13 percentage point in growth every week.

"Markets seemed to assume the Fed's rhetoric shift away from hawkish pre-commitment as inherently dovish, but strong data flow recently suggests it may yet find scope for hikes this year," Mr Spivak said, adding that the duration of the shutdown will be important, making gold prices highly data-sensitive.

Worries over a disorderly Brexit, after UK Prime Minister Theresa May's deal was defeated by British lawmakers on Tuesday, also supported gold prices, analysts said.

Mrs May on Wednesday narrowly won a confidence vote overnight and invited other party leaders for talks to try to break the impasse on a deal.

Spot gold is about to exit a neutral range of US$1,285-US$1,299, and either rise to US$1,311 or drop towards US$1,268, according to Reuters technical analyst Wang Tao.

Platinium fell 0.9 per cent to US$797.50 an ounce, while silver dropped 0.3 per cent to US$15.55. REUTERS