Palladium on Friday surged the most intraday since 2008 as scant supply and robust demand extended a record-breaking rally.
Spot palladium jumped as much as 9.7 percent to an all-time high of US$2,539.14 per ounce.
The metal rallied to post its best week since 2001 and has shown little sign of slowing down, even as some analysts caution that prices might be due for a pullback.
Prices were up 8 percent as of 5pm in New York, while futures settled 2.2 percent higher at US$2,224.90.
While palladium’s rally has been driven by supply deficits and surging demand, the increases have exceeded market forecasts, said Noah Capital Markets Ltd analyst Rene Hochreiter, who expects spot prices could retreat to an average of US$2,250 per ounce for the rest of the year.
“Prices do not go up forever and the recent run should see a correction, though the fundamental shortfalls will not go away anytime soon,” Hochreiter said.
Palladium is trading at more than twice the price of platinum, which might motivate automakers to use it as a substitute, Australia & New Zealand Banking Group Ltd (ANZ) said.
“A modest recovery in the auto sector, along with tighter emissions regulations, should lend support,” ANZ strategists Daniel Hynes and Soni Kumari said in a report.
Still, a “price setback is possible for palladium following its impressive rally this year,” they added.
Palladium’s surge has been a boon for platinum group miners in South Africa, which accounts for about 38 percent of global palladium supply.
The FTSE/JSE Africa Platinum Mining Index is at the highest since 2011 and the shares of top producer Sibanye Gold Ltd have risen nearly fourfold in the past 12 months.
“Further weakness in mining production can’t be ruled out,” ING Bank commodities strategists Warren Patterson and Yao Wenyu said in a note to clients. “While higher prices should be encouraging miners to look to boost output, palladium is largely produced as a by-product, making supply more inelastic.”
Supply constraints in South Africa, where producers are grappling with an uncertain electricity system, have been one of the main drivers for the price rally, ABN Amro Bank NV strategist Georgette Boele said.
“It’s a very structurally tight market,” TD Securities analyst Ryan McKay said by telephone from Toronto. “Even the actual physical demand — automakers who use this stuff providing a bid for that metal — that drives the prices up when it’s super tight and supply is not really there.”
In other commodities trading, gold rose US$9.80 to US$1,558.80 per ounce and silver rose US$0.13 to US$18.01 per ounce, while copper was unchanged at US$2.85 per pound.
Additional reporting by AP
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