Palladium Tops Precious Metals Gains as China Car Sales Advance

Gold's Glittering Rally...But Is It a Risky Bet?
  • Metal gaining on China car sales, U.S. growth: Citigroup
  • Hedge funds boosted net-long positions to 1-year high

Palladium is leaving other precious metals in the dust.

The commodity used in pollution-control devises for gasoline-fueled vehicles climbed to the highest since October on Monday. It has jumped 20 percent this quarter, almost seven times the pace of gains for gold. Palladium is benefiting from improving car sales in China and signs of resilience in the U.S. economy, Citigroup Inc. analysts wrote in a report Monday.

Traders aren’t the only ones taking notice. Hedge funds and other large speculators boosted their net-long positions on palladium by 38 percent to 15,281 contracts in futures and options in the week ended July 26, the highest since June 2015, government data released three days later showed. Prices rebounded after slumping 30 percent last year, the most since 2008.

“We expect China auto sales to remain robust, and grow 9 percent year-on-year,” Citigroup analysts led by Ed Morse said in the report. “The market has seemingly shaken-off anxiety and adopted a more constructive view.”

Palladium futures for September delivery advanced 0.9 percent to settle at $716.25 an ounce at 1:02 p.m. on the New York Mercantile Exchange, after touching $724.55, the highest for a most-active contract since Oct. 9.

Retail sales of cars, sport utility vehicles and multipurpose vehicles climbed 9.5 percent to 10.8 million units in the January-June period, according to the China Passenger Car Association.

Palladium is also benefiting from mounting expectations that the Federal Reserve will be slow to raise interest rates. Traders are pricing in the odds of a rate hike by December at 34 percent, down from 48 percent a week ago. Lower rates boosts the allure of precious metals as an investment because they don’t offer yields or dividends. The probability of a rate hike slipped after government data showed the U.S. economy grew less than expected in the second quarter.

“The U.S. economy defied expectations, failing to gain ground in the second quarter, and growth remained as weak as in the first quarter,” Commerzbank AG said in a note to investors on Monday. “The likelihood of the U.S. central bank raising interest rates this year has consequently fallen to just over a third.”

Gold futures for December delivery added 0.2 percent to $1,359.60 an ounce on the Comex in New York, as silver futures rose. Platinum advanced on the Nymex. Silver has risen about 10 percent since the end of June, while platinum has gained 14 percent.

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