Picture: 123RF/ALEXMX
Picture: 123RF/ALEXMX

Palladium has climbed to a record on concerns about tightening supplies of the metal, which is mainly used in catalytic converters that curb vehicle emissions.

Prices rose as much as 1.8% in London, pacing gains among precious metals. The rally accelerated in recent days amid growing political tensions between the US and Russia, one of the top producers of palladium, as well as stimulus measures in key consumer China. Investors are also piling in, with speculators’ bullish bets at the highest since June.

More broadly, the metal has been supported by consumers turning toward petrol-driven cars, which tend to use more palladium in automotive catalysts, instead of diesel. Palladium is heading for a third straight annual gain as analysts predict deeper supply deficits.

“Palladium is higher because of expectations of stimulus in China, and higher gold prices are also helping,” said Georgette Boele, an analyst at ABN Amro Bank. Still, she suggested that prices may have got ahead of fundamentals in the short term.

Palladium was up 1.1% at $1,136.41 an ounce by 12.14pm in London. Prices have gained about 7% this year, outperforming other major precious metals.

Output will trail demand by 481,000 ounces this year and deficits will persist throughout 2020, leading to the “tightest” market in two decades, Citigroup said in a note in late September.

Speculators are becoming increasingly bullish. The net long position held by money managers has increased each week over the past couple of months, US government data shows.

The scramble for supply has created a lucrative business of lending the metal, spurring withdrawals from exchange-traded funds (ETFs). Holdings in ETFs fell to 24.9 tonness as of Monday, the lowest since 2009, data compiled by Bloomberg shows.

The US’s plan to pull out of a nuclear weapons pact with Russia is increasing tensions between the nations, and may be adding to concerns about future supply. Moscow-based MMC Norilsk Nickel produced 2.78-million ounces in 2017, the most of all the companies tracked by Bloomberg Intelligence.