Palladium sees wildest price swings since 2015 as investors exit

April 30, 2019

London (April 30)  Palladium futures tumbled, spurring the wildest price swings since late 2015 as investors turned sour on the precious metal.

The commodity used mostly in auto catalysts has been a profitable trade as supply shortages boosted prices of near-term contracts. That gave investors the incentive to sell futures closer to delivery and buy those that are further along the curve as producers struggle to meet demand from carmakers. That incentive has narrowed this year as supply concerns ease.

Palladium futures for delivery in June settled in New York on Monday at a premium of more than $3 to the September futures. The spread between the two contracts has shrank from more than $20 in February. The cost to borrow the metal has also tumbled this year.

“People who have done very well long material and lending it have seen margins compress,” Tai Wong, the head of base and precious metals derivatives trading at BMO Capital Markets in New York, said in an email. “The drastic supply shortage seen early in the year has eased significantly.”

The decline in the lease rate for palladium means there’s less incentive for industrial consumers to buy the metal outright, said Michael Sheehan, a senior portfolio manager at Orion Commodities Fund.


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