Strong speculative demand kept palladium near 16-years highs on Monday, but weak fundamentals are expected to soon take their toll on prices of the metal used to make autocatalysts for gasoline-fueled cars.
Meanwhile, gold rose ahead of a US Federal Reserve policy meeting on Tuesday and Wednesday that is expected to yield clues to the timing and magnitude of future interest rate increases. Spot gold was up 0.2% at $1,268.81 an ounce, after shedding 1% on Friday, its biggest one-day percentage fall since May 18, Reuters reported.
US gold futures fell 0.1% to $1,270.10 an ounce. Palladium gained 0.55 to $894.50 after rising above $910 an ounce on Friday, its highest since 2001.
“It seems to be speculators driving the price higher,” said Robin Bhar, head of metals research at Societe Generale, adding there was a shortage of metal for immediate delivery. That shortage has created a premium or backwardation of around $6 and $21 dollars an ounce for the June and July futures respectively over the August contract. But analysts say declining car sales in China and the United States point to weaker demand for palladium.
Overall, precious metals markets are waiting for the outcome of the Fed’s meeting. Higher rates as expected by the market could boost the dollar, which when it rises makes dollar-denominated commodities more expensive for holders of other currencies. “Markets will be scanning the Fed’s language to see what it is thinking in terms of forward rate guidance and looking for clues on how it will shrink the balance sheet,” Societe Generale’s Bhar said.
Silver was down 0.1% at $17.15 per ounce, after touching a one week low of $17.07. Platinum rose 0.8% to $942.90 per ounce.
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