Palladium Price Falls to Near Two-Year Low; Gold Steady

Johannesburg-S.A. (Jun 25)  Palladium prices tumbled to their lowest level in almost two years on Thursday, amid concerns about weak auto demand from the U.S. and China during a time of plentiful output from South African mines.

Palladium for July delivery, the most actively traded contract, was recently down 3.2% at $673.60 a troy ounce, the lowest level since July 2013. Prices were on track for their biggest daily drop since March 27.

Stockpiles of the metal have mounted this year, as companies in South Africa increased output after last year’s five-month strike. South Africa is the second-largest palladium producer after Russia.

At the same time, investors are questioning whether demand for the metal, which is used to scrub emissions from gasoline engines, will be strong enough to sustain current prices. China’s car industry has been hit hard by the country’s slowing economy, hampering sales in the world’s biggest auto market. Trade data showed Chinese palladium imports fell for an eighth straight month in May,  Barclays  said in a recent note, reflecting a decline in passenger and commercial vehicle sales.

“China auto sales have alarmed the market,” said  Edward Meir, a strategist at INTL FCStone. “People fear demand is slipping.”

Global demand for palladium is expected to outpace supply by 100,000 ounces this year, narrower than 1.8 million ounces in 2014, according to data from precious metals consultancy  Johnson Matthey.

In other markets, gold prices were broadly unchanged, as the markets awaited further news on negotiations between Greece and its European creditors. Eurozone finance ministers were checking documents laying out a possible financing deal for Greece on Thursday. Without a deal, Greece is set to default on a June 30 payment to the International Monetary Fund.

Gold for August delivery was recently unchanged at $1,172.80 a troy ounce.

Source: WSJ