Rout Hammers Palladium After Slew of Bubble Warnings

March 29, 2019

London (March 29)  Palladium is heading for the biggest weekly decline in more than three years as investors’ focus turned to demand amid concerns over slowing global growth, with the slump following repeated warnings that the metal’s recent surge to record highs had propelled it into bubble territory.

The metal used in auto catalysts to curb emissions sank 12 percent this week after hitting an all-time high on supply woes on March 21. The massive rally, which saw prices almost double since August, spurred predictions a reversal was inevitable, and hedge funds had cut bullish bets for a fourth week.

With the palladium market expected to be in deficit for an eighth year, manufacturers of gasoline vehicles have scrambled to get hold of supplies to meet stricter standards for pollution control. Still, analysts surveyed by Bloomberg last week saw the metal ending the year in the $1,300s an ounce, partly as shortages are priced in and as car sales in key markets slow. As prices scaled new highs in the first quarter, Saxo Bank A/S,  Commerzbank AG   (DE:CBKG) and UBS Group AG were among banks warning of the potential for substantial pullbacks.

“Much of palladium’s doubling in price over the last eight months was driven by supply concerns, and these are well-explored,” Michael McCarthy, chief market strategist at CMC Markets Asia Pacific Pty, said in an email. “Naturally the momentum attracted speculative as well as trade support. The ongoing contraction in China car manufacturing and a recent string of weaker macro data has shifted focus to the demand side of palladium markets, and at the moment selling is begetting selling.”

Spot palladium traded at $1,363.20 an ounce at 10:18 a.m. in Singapore, after dropping 7.3 percent Thursday and more than 5 percent the day before. It’s down 12 percent in March, but still heading for a fourth quarterly gain after prices hit an all-time high of $1,614.88 last week.

In other precious metals, spot gold is down 1.7 percent this week, while silver is on course for a 2.5 percent weekly decline. Platinum lost 0.3 percent this week, paring the biggest quarterly advance since early 2016.


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