Picture: ISTOCK
Picture: ISTOCK

Bengaluru  — Palladium prices broke above $1,500 for the first time on Wednesday due to a prolonged supply deficit, while gold rose to a new 10-month high as the dollar struggled before the US Federal Reserve’s policy meeting minutes.

Palladium is crucial in the making of catalytic converters used in exhaust systems of vehicles, and an improvement in demand from the auto sector has supported the metal's surge.

“Demand [for palladium] is increasing year by year because of catalyst demand for [petrol] engines. Environmental requirements are getting stronger, which means more palladium is needed in [manufacturing] a car,” said Yuichi Ikemizu, Tokyo branch manager at ICBC Standard Bank.

Furthermore, the supply deficit is likely to widen in 2019 as stricter emissions standards increase demand for catalytic converters, Britain-based autocatalyst manufacturer Johnson Matthey said last week.

Spot palladium rose to a record high of $1,500.5/oz and was up 1.3% at $1,499 as of 4.20am GMT. The autocatalyst metal has gained almost 19% so far in 2019, making it one of the best performing metals.

Gold prices hit their highest since April 19 2018 as the dollar was capped on falling US treasury yields and optimism surrounding trade talks between the US and China.

US President Donald Trump said on Tuesday that trade talks with China were going well and suggested he was open to pushing off the March 1 deadline to complete negotiations.

Progress in trade discussions between the world’s top-two economies has whisked off the safe-haven appeal for the dollar, making gold more attractive to investors.

Spot gold was up 0.2% at $1,343.51/oz after rising to a high of $1,346.73 earlier in the session.

US gold futures dipped 0.2% to $1,342.6/oz.

Investors are now looking ahead to the release of US Federal open market committee’s minutes from its January 29-30 policy meeting at 7pm GMT.

“The dovish shift in US Federal Reserve language over the year-to-date has improved the fundamental outlook for gold prices,” Fitch Solutions said in a note.

“A less steep trajectory for US rate hikes bolsters our existing view that US dollar gains are behind us and that this will help put a floor under gold prices.”

Spot gold may peak around a resistance at $1,351/oz, as suggested by a projection analysis and a rising tren dline, said Reuters market analyst Wang Tao.

Among other precious metals, platinum fell 0.2% to $815.50/oz

Spot silver was up 0.3% to $16.02/oz.