Palladium price drops to five-year low

London (Jan 12)  Palladium slumped to a five-year low as Chinese car sales increased at the slowest pace in three years, adding to concerns about weaker demand in one of the world’s biggest buyers of the metal. Gold was little changed.

Platinum, which is also mainly used in catalytic converters that cut harmful emissions, fell near the lowest in seven years. With a faltering economy and turmoil in the stock market hurting consumer confidence, China’s vehicle sales rose 4.7% last year, the smallest gain since 2012, China Association of Automobile Manufacturers data show.

The country accounts for more than a fifth of global palladium demand and the recent market tumult is a further worry for investors already concerned by China’s slowest economic expansion in a generation. Equities in Shanghai were little changed on Tuesday as policy makers intensified efforts to stabilize the yuan.

“The markets for platinum and palladium are very nervous about what’s going on in China, despite the fact that it has been calming down a little bit,” Georgette Boele, an analyst at ABN Amro Bank in Amsterdam, said by e-mail. “Jewellery demand from China is likely to be lower, and that’s also affecting” the price of metals, she said.

Palladium Price

Palladium for immediate delivery dropped as much as 5.7% to $451.85 an ounce, the lowest since July 2010, and was at $470.63 by 11:15am in London, according to Bloomberg generic pricing. Platinum was down 0.7% at $839.03 an ounce.

The slump in Chinese shares this year has sparked renewed demand for gold as a haven. Bullion reached a two-month high on Friday and investors are holding the most through exchange-traded products since early December. Holdings in the funds gained for a third day on Monday, rising 2.4 metric tons to 1 477.7 tons, data compiled by Bloomberg show.

Gold lost 0.2% to $1 091.84 an ounce in London on Tuesday. Prices may find resistance at about $1 100, according to Ole Hansen, head of commodity strategy at Saxo Bank in Copenhagen.

“Once we see some of the panic over China start to fade, the market will revert to the US dollar and interest-rate developments,” Hansen said by phone. “That will provide some headwinds for gold.”

Silver added 0.1% to $13.8705 an ounce, after falling the previous two days.

Source: Bloomberg