Palladium Falls Toward Three-Week Low

Palladium futures fell below $1,315 an ounce, heading toward their lowest level since mid-August, as the metal remained influenced by near-term investment flows. Heightened economic uncertainty stemming from the conflict in the Middle East has raised expectations of monetary tightening across major economies, weighing on demand for the non-yielding metal. The ECB hiked its policy rate at its September meeting, while a rise in US producer inflation led investors to increase bets on a Fed rate hike at its meeting next week. Meanwhile, UBS forecasts a market surplus for palladium, as increased recycling and weaker consumption of catalytic converters are expected to more than offset lower mining output compared with last year. On the other hand, Russian palladium exports to China doubled in the first seven months of the year.

Palladium decreased 5.03% to 1311.5 USD/t.oz

Palladium futures strengthened to around $1,360 per ounce, recovering from recent losses as supply risks, resilient automotive demand and a weaker US dollar supported prices. Supply concerns persisted in South Africa and Russia, which together account for the vast majority of global mined output, with operational hurdles, elevated costs and power-grid instability in South Africa raising concerns over refined output. Logistical frictions around Russian metal also limited spot liquidity. Demand remained supported by resilient hybrid-vehicle production, which requires higher palladium loadings in autocatalysts, while steady chemical and electronics consumption kept physical balances tighter than expected. The dollar index fell to 98.75, near a two-week low, while softer Treasury yields reduced the opportunity cost of holding non-yielding metals. Markets priced a 60% chance of a Fed rate hike next week, up from 50% before stronger US jobs data.