Palladium barrels toward $2,000 as rally continues

Palladium seems headed toward a record $2,000 an ounce, with the metal’s blistering rally showing no sign yet of cooling off.

Prices climbed for an unprecedented 16th day after signs of a breakthrough in the US-China trade talks, fuelling hopes for a rebound in the auto industry, palladium’s biggest consumer. Prices surged this week as mining disruptions in major producer South Africa threatened to tighten a market already hobbled by a persistent deficit.

“The physiological $2,000 level now acts as such a magnet to the market,” said Ole Hansen, head of commodity strategy at Saxo Bank A/S. The strong momentum driven by tight fundamentals was given a further jolt on news that a phase-one trade deal has been reached.

Spot palladium climbed as much as 2.1 per cent to $1,981.39 an ounce. The metal has gained 56 per cent this year even as global car sales remain weak. Citigroup Inc forecast prices could hit $2,500 next year.

Tight supplies, which have trailed demand since at least 2012, mean that autocatalyst makers are scrambling to get hold of the metal to meet stricter pollution rules.

South Africa, the world’s No. 2 palladium producer, expanded rolling blackouts to a record level earlier this week, disrupting miners’ operations. The situation has eased and most mining operations have returned to normal, although the country continues to experience power cuts.

Still, given the relatively small size of the market, a pullback in palladium prices could be sharp, said ABN Amro Bank NV strategist Georgette Boele.

“What goes exponentially up can eventually also drop like that,” she said. “It will not defy gravity forever.”

President Donald Trump signed off on a phase-one trade deal with China, averting the December 15 introduction of a new wave of US tariffs.

Gold and silver were little changed, while platinum declined, dropping as much as 1.8 per cent. The metal will probably remain in surplus, Morgan Stanley said this week.