Palladium Rises to Over 2-Year High

Palladium futures fell below $1,290 per ounce, after remaining under pressure in late July as easing Middle East tensions lifted precious metals. The metal tracked gains in gold, platinum, and silver after President Donald Trump said fresh negotiations with Iran would begin on Monday and revealed he had called off a planned large-scale attack following requests from regional allies. The announcement sent Brent crude down more than 7%, easing concerns that elevated energy prices would fuel inflation and force central banks to keep interest rates higher for longer. Additional support came from a weaker dollar after Japanese authorities intervened to support the yen, making dollar-priced metals more attractive to overseas buyers. Investors also awaited US labor market data, including JOLTS job openings, the ADP employment report, weekly jobless claims, and nonfarm payrolls, for clues on the Federal Reserve's policy path after officials kept interest rates unchanged last week.

Palladium futures traded around $1,260 per ounce, remaining under pressure as the dollar hovered near a one-month high and investors awaited the Federal Reserve's policy decision. The Fed is widely expected to keep interest rates unchanged, with markets pricing a 70% chance of a pause and a 30% probability of a 25-basis-point hike, while still expecting a rate increase in September. A stronger dollar made greenback-priced metals more expensive for overseas buyers, weighing on palladium. Meanwhile, Middle East tensions offered little support as markets monitored developments in the Strait of Hormuz after Iran launched missiles at US forces and Gulf states proposed a framework to manage the key shipping route. On the fundamental side, palladium faced headwinds from weakening automotive demand, as rising electric vehicle adoption and continued substitution with platinum weighed on consumption. Over the past month, palladium has gained 4.75% and was up 3.26% from a year earlier.

Palladium futures rose above $1,200 per ounce, rebounding from a near one-year low hit at the end of June, as resilient hybrid vehicle demand more than offset expectations of a global market surplus. Demand for hybrid electric vehicles (HEVs) remained robust as major automakers expanded the use of software-defined technologies to HEVs, which continue to support palladium consumption through their use of catalytic converters. On the other hand, Nornickel, the world’s largest palladium producer, expects a global surplus in 2026, as rising electric vehicle adoption weighs on long-term demand and keeps prices below levels last seen at the start of the year. The Russian miner also plans to relocate its refining operations to Monchegorsk, a move expected to improve production efficiency and increase mined output. Meanwhile, expectations of at least one more Federal Reserve rate hike by year-end reduced demand for non-yielding assets, limiting further price gains.