Palladium hits 13-1/2-year high on supply fear; gold eases

New York (Aug 29) - Palladium rose to a 13-1/2-year high on Friday on worries over uncertain supplies from Russia, the world's largest producer of the metal, while gold prices eased on a dollar rise and gains in U.S. equities.

Tensions rose after Ukraine called for full membership in NATO, its strongest plea yet for Western military help after accusing Russia of sending in armoured columns that have driven back its forces in support of pro-Moscow rebels.

Supply of autocatalyst metal palladium from Russia is expected to fall 2 percent this year, GFMS analysts said, but the impact of potential sanctions over the Ukraine conflict is likely to be minimal. Russia accounted for more than 40 percent of supply last year.

Palladium prices rose 2.1 percent this week, despite a 5 percent weekly drop in the holdings in palladium exchange-traded funds.

"Investors have stepped in on declines to bring prices right

back up so far this year, and there is also a geopolitical

element to the palladium market as well," said James Steel,

chief metals analyst at HSBC.

Spot palladium was up 1.3 percent at $909.55 an ounce

by 2:42 p.m. EDT (1842 GMT), while the NYMEX palladium contract

for December delivery settled up $11.45 at $909.55 an

ounce.

  But big speculative long positions in U.S. palladium futures

and the sizable ETF outflow earlier this week suggested

investors could cut bullish bets, said Bart Melek, head of

commodity strategy at TD Securities. 

 Meanwhile, spot gold fell 0.3 percent to $1,286.35 an

ounce. U.S. COMEX gold futures for December delivery

settled down $3 an ounce at $1,287.40, with trading volume about

45 percent below its 30-day average, preliminary Reuters data

showed.

    For the month, gold has posted a 0.3 percent gain on

lingering geopolitical tensions over Ukraine, Iraq and Gaza,

recovering after briefly falling to a two-month low at $1,273.06

last week.

    On Friday, the S&P 500 equities index edged up as the

latest in a string of positive economic reports pushed investors

to extend a rally that was briefly threatened by overseas

concerns.

    The gold market largely ignored heightened tensions over

Ukraine, and Britain's raising of its international terrorism

threat level to the second-highest in response to possible

attacks being planned in Syria and Iraq.

    Among other precious metals, silver was down 0.6

percent at $19.44 an ounce, while spot platinum edged off

0.3 percent to $1,416.40 an ounce.

Source: Reuters