What happened? Palladium surged 11% in intraday trading, hitting a one-month high
Analysis suggests that automobile manufacturers are actively replenishing the tail gas suppression catalysts for internal combustion engine vehicles, leading investors to cover short positions in palladium, increasing short-term market demand
On Friday night, as the interest rate cut and cooling measures led to a general decline in precious metals, spot palladium rose sharply against the trend by 12%, reaching a new high in a month.
In the early trading session of the US stock market, spot palladium rose by about 11.2% at one point, reaching a high of $1,029.46 per ounce, a one-month high, narrowing the year-to-date decline to about 12%. Subsequently, the intraday gain narrowed to 3.2%, trading at $953.17 per ounce.
Analysis indicates that the main reason for this surge is the active replenishment of catalytic converters for internal combustion engine vehicles by car manufacturers, prompting investors to cover their short positions in palladium. Bart Melek, Global Head of Commodity Strategy at TD Securities, stated that as car manufacturers are replenishing their catalytic converter inventories, some funds may be forced to close out their positions, leading to an increase in short-term market demand. Tai Wong, an independent metal trader in New York, commented:
"Recently, there has been significant buying in palladium ETFs, causing a short-term physical shortage and resulting in a backwardation in the forward market. This has caused some confusion in the EFP (exchange for physical) market, which is already thin, leading to significant volatility and short covering. I expect this volatility to continue for a few more days."
Data shows that palladium is mainly used to reduce emissions from gasoline cars. However, the palladium market has been under pressure this year as supply has exceeded demand. Part of the reason for the decline in demand is the increasing market share of electric vehicles (EVs) in the global automotive market, as EVs do not require catalytic converters to filter emissions. Therefore, according to data from the Commodity Futures Trading Commission (CFTC), hedge funds and money managers have been consistently bearish on palladium this year. In the week ending June 11, net short positions in COMEX palladium futures hit a historical high since December 2009.
Palladium prices briefly rose to $1,029.46 per ounce, with an increase of 11%, before pulling back slightly. As of 12:50 pm New York time, the price was $964.07 per ounce. This increase has reduced the year-to-date decline to 12%