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Palladium Dives 6% as Recession Fears Bite; Gap With Gold CavesBy Barani Krishan
Investing.com - Precious metals bears have warned for a while it may happen, and it has -- prices of palladium, the auto-catalyst metal, have crashed on the back of
global economic worries, sharply narrowing its gap with gold.
It had hit a
record high of $1,616.30 last week.The decline on the futures price was the largest one-day dollar decline since Feb. 23, 2000 and biggest single-session percentage drop since Jan. 25, 2017, according to Dow Jones Market Data.
Some analysts and investors had warned that palladium had turned into a bubble asset since the start of 2019.
The metal was
up as much as 28% on the year at last week's peak on worries of supply scarcity-- despite signs the auto industry was likely to underperform this year amid a U.S. recession scare and potential slowdown of the Chinese and euro zone economies.
Despite Wednesday's plunge, palladium remained the world's costliest traded metal. The spot price is
still up 14% on the year. The futures price is up more than 18%.
But spot palladium's premium to gold now stand at just below $170 an ounce after being at around $300 just weeks ago.
Some analysts, however, said that
nothing fundamentally has changed with palladium as the supply of the metal, used for purifying gasoline engine emissions, wasn't going any higher.
"Palladium is having a wild day, just how wild depends how you look at it," said Walter Pehowich, executive vice-president at Dillon Gage Metals in Addison, Texas.
"Trading this market requires a strong stomach, and further volatility is almost a guarantee," Pehowich added. "One can argue that the decline of over $100 is a big move, and, yes, that’s true.
But the other side of the coin is one can argue that the volume generated from that selloff is not a big move at all. One must remember the
supply is still in a shortfall, and higher prices are not out of the question."
Eli Tesfaye, metals strategist at RJO Futures in Chicago, agreed.
"I think what we saw today was a combination of profit-taking and stop-loss orders," Tesfaye said. "Palladium's fundamentals are still intact."
Source: Investing.com
https://www.investing.com/news/commodit ... es-1820061
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