Palladium prices rocketed on Wednesday, on track for their best daily gain since 1997, as a lockdown in major producer South Africa exacerbated supply woes, while gold remained volatile as markets eyed U.S. stimulus.
Deficit-hit palladium rose as much as 24.8% earlier and was last up 20.6%, at $2,260 an ounce, as of 2:54 p.m. EDT.
“Palladium is soaring on heightened supply concerns … (South Africa’s lockdown) will make an already tight supply situation much worse,” said Edward Moya, a senior market analyst at broker OANDA.
The auto-catalyst metal rose 10% in the previous session on concerns of mine closures, though South Africa said on Wednesday it would continue to process platinum group metals during the lockdown.
The price rise “looks like short positions squeeze on the sentiment from South African mines closure. … (A) 21-day mines closure would mean 2% global supply cut for 2020, while the magnitude of car sales drop for the year remains unclear,” Dmitry Glushakov, head of metals and mining research at VTB Capital.
Spot gold was down 1.2% to $1,616 per ounce in volatile trade, after earlier hitting a two-week high. Prices surged as much as 5% on Tuesday.
U.S. gold futures settled 1.6% lower at $1,634.20 an ounce, a day after posting their biggest one-day jump since 2009.
“It’s very volatile because we have a coronavirus-hit gold market now, we’ve got supplies from three of the biggest refiners offline in Switzerland and gold is not in the right place where it is needed. So it’s creating a lot of nervousness,” said Saxo Bank analyst Ole Hansen.
The benchmark spot gold prices traded below U.S. gold futures in a sign the market is worried that air travel restrictions and refinery closures will hamper shipments of bullion to the United States to meet contractual requirements.
U.S. exchange operator CME Group on Tuesday announced a new gold futures contract to combat price volatility caused by the shutdown of gold supply routes, but traders and bankers said it would not immediately calm markets.
Investors were awaiting the U.S. Senate’s vote later in the day on a $2 trillion package to alleviate the economic impact of the coronavirus pandemic.
The virus has infected nearly 423,000 people, forcing lockdowns across the globe to combat its spread and has prompted countries and central banks worldwide to step in with policy aids.
Platinum jumped 4.5% to $740 an ounce, while silver rose 0.7% to $14.47.
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