Palladium Steadies Ahead of Fed Minutes

Palladium hovered near $1,260 per ounce, steadying after recent losses as investors assessed shifting expectations for US monetary policy ahead of the release of the Federal Reserve's June meeting minutes. Softer-than-expected US jobs data last week prompted markets to scale back expectations for a near-term rate hike, supporting sentiment across precious metals. Traders now see a 56%–57% chance of a September rate increase, down from above 60% before the jobs report, while the upcoming Fed minutes are expected to provide further policy clues. Meanwhile, gains were capped as oil prices climbed following fresh attacks on vessels in the Strait of Hormuz, reviving concerns over energy supply disruptions and renewed inflationary pressures. On the supply side, Russia's Norilsk Nickel, the world's largest palladium producer, expects output to decline 2% this year due to lower ore grades, while South African platinum group metal mines continue to face production disruptions.

Palladium climbed above $1,270 per ounce, recovering from levels last seen in early October as a weaker US dollar supported precious metals. Oil prices continued to decline as tanker traffic normalized amid ongoing peace negotiations, although uncertainty over a lasting agreement persists. The dollar softened after weaker-than-expected US payroll and lower inflation data reduced expectations of further Fed rate hikes this year, improving the appeal of dollar-denominated metals. However, Fed Chair Kevin Warsh reiterated the commitment to returning inflation to its 2% target. On the supply side, Russia's Norilsk Nickel, the world's largest palladium producer, expects output to decline 2% this year due to lower ore grades, while South African platinum group metal mines continue to face operational constraints. Demand remains under pressure as China's electric vehicle exports surged 49% year-on-year, accelerating the demand shift away from palladium used in automotive catalytic converters.

Palladium traded below $1,230 per ounce, hovering around its late-September level as tensions in the Gulf fueled inflation concerns. Crude oil prices initially surged after Iran attacked US military sites on Sunday, raising market uncertainty, although both sides later agreed to halt hostilities and resume peace talks. Sentiment in the platinum group metals (PGM) market remains pressured by long-term inflation concerns and expectations of a hawkish Federal Reserve, with few traders pricing in three interest rate hikes this year, reducing the appeal of non-yielding assets such as palladium. Meanwhile, the PGM market is expected to post a small surplus. On the demand side, a growing electric vehicles market share reduces long-term demand for palladium used in catalytic converters for internal combustion engine vehicles, as Chinese automakers expand across borders, adding further headwinds.