China Car Surge Sends Palladium on Steepest Ascent in Six Years

  • Platinum prices also advance to their highest level since 2015
  • Dollar and outlook for U.S. rates help power precious metals

What's Behind the Recent Surge in Palladium Prices?

Palladium posted the steepest intra-day jump in more than six years, leading precious metal gains, as rising car sales in China raised speculation supply won’t be enough to meet demand.

Chinese vehicle sales in July gained the most in 17 months, data showed this week. Total supply of palladium, used in pollution-control devices for gasoline-fueled vehicles, will trail consumption by 53,000 ounces, as mine production declines, New York-based researcher CPM Group said in a report in June.

Palladium has climbed more than 20 percent this quarter, 10 times gold’s advance, as it benefits from improving car sales and signs of resilience in the U.S. economy. Precious metals, which don’t offer yields or dividends, are also helped by central banks around the world cutting interest rates to boost growth.

That “highlighted a generally supportive backdrop to palladium demand, exacerbated by ongoing concerns that output from top producers Russia and South Africa may be under threat,” said Jonathan Butler, a precious metals strategist at Mitsubishi Corp. in London. “We could see a bit of profit taking from here, but the $700 level seems to have been recaptured convincingly.”

Palladium futures for September delivery climbed 4.6 percent to settle at $726.40 an ounce at 1:08 p.m. on the New York Mercantile Exchange. Prices earlier jumped as much as 7.7 percent, the biggest intra-day gain since May 2010. That surge took prices to the highest since June 2015.

The dollar has dropped as traders cut bets that the Federal Reserve will raise interest rates this year. The Fed has so far refrained from raising borrowing costs after hiking them in December.

In ETFs and other metals:

  • Holdings in gold-backed exchange-traded funds fell a second day to 2,035.1 metric tons on Tuesday, data compiled by Bloomberg show.
  • Gold futures for December delivery gained 0.4 percent to $1,351.90 an ounce on the Comex in New York. Silver also rose on the Comex.
  • Platinum, the precious metal used in pollution-control devices for diesel-powered vehicles, surged as much as 3.4 percent to $1,199.50.
  • Anglo American Platinum Ltd. and Impala Platinum Holdings Ltd. both rose more than 3 percent in Johannesburg trading.

— With assistance by Ranjeetha Pakiam

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