Monday, May 16

Palladium falls nearly 13% on worries over China demand hit

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Palladium prices fell nearly 13% on

Monday as China’s COVID-led lockdowns soured the demand outlook

for the autocatalyst, while looming US interest rate hikes

took the shine off gold.

Spot palladium fell 10.9% to $2,115.12 per ounce by

12:11 pm ET (1611 GMT), after hitting its lowest since March

29 at $2,068.82.

Commodities across the board dipped as concerns grew over

prolonged lockdowns in Shanghai and potential increases to US

interest rates hurting global growth and demand.

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Palladium, used in vehicle exhausts to curb emissions, has

retreated nearly 40% since hitting an all-time high in early

March on concerns that the war in Ukraine could cut supply from

key producer Russia.

“Much of the angst in palladium is surrounding the potential

problems with the Chinese economy,” said head of commodity

strategies at TD Securities, Bart Melek.

“(With) an increasing amount of that country being shut,

chances are auto demand and economic activity broadly aren’t

going to be as strong as we thought, and this is offsetting a

lot of the potential shortage concerns associated with the

Russian sanctions,” Melek added.

Russia’s Nornickel said its first-quarter

palladium output fell year-on-year.

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Gold fell 1.8% to $1,895.47 per ounce, while US gold

futures fell nearly 2% to $1,896.10.

“Due to the broad-based rise in yields, gold is losing its

attractiveness as a non-interest-bearing investment, as

government debt securities are again yielding positive nominal

returns,” Commerzbank said in a note.

Although bullion is considered a hedge against soaring

inflation and uncertainties such as the Ukraine conflict, rising

interest rates dampen its appeal by increasing the opportunity

cost of holding the non-interest bearing


The dollar index hit a two-year high, making gold

costlier for overseas buyers.

Platinum fell 1.8% to $914.24 after touching a trough

since December 2021, while silver fell 2.2% to $23.61 per

ounce, after hitting an over two-month low.

(Reporting by Seher Dareen and Eileen Soreng in Bengaluru;

Editing by Shailesh Kuber and Marguerita Choy)

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