NEW YORK – Palladium climbed near a record as the US plans to pull out of the nuclear weapons pact with Russia, fueling tensions with one of the largest producers at a time when consumers are already scrambling for supplies.
Production will trail consumption by 481 000 ounces this year and deficits will persist through 2020, leading to the “tightest” market in two decades, Citigroup Inc. analysts including Max Layton said in a note in late September. The tightness in supply has created a lucrative business of lending the metal, spurring withdrawals from exchange-traded funds.
Hedge funds have been building their bullish bets on the metal. In the week ended Oct. 16, money managers boosted their net-long position for an eighth straight week, the longest streak since January 2013. Wagers on the metal’s price advance outnumbered bearish bets by 10 122 futures and options, the most since mid-June, Commodity Futures Trading Commission data released Oct. 19 showed.
The metal for immediate delivery climbed as much as 2.2 percent to $1 106.25 an ounce, near a record of $1 139.68 reached in mid-January. Palladium traded at $1 104.28 at 8:45 a.m. in New York.
Moscow-based MMC Norilsk Nickel PJSC produced 2.78 million ounces in 2017, the most of all the companies tracked by Bloomberg Intelligence.
Trump is “pulling out of the agreement with Russia,” Phil Streible, a senior market strategist at RJO Futures, said by telephone. “That could tighten up available supply for palladium.”
While the lease rates are down from a peak in August, borrowers still pay holders of palladium 7.2 percent to use the metal for a week as of Oct. 22, data compiled by Bloomberg show. That’s double the 3.2 percent yield on 10-year Treasuries. Holdings in exchange-traded funds backed by palladium shrank to the lowest since March 2009.