Palladium in record freefall with precious metals caught in rout

Fears of economic fallout from the virus, along with slowing Chinese car sales, are now battering the commodity.

Palladium, one of last year’s best-performing commodities, tumbled the most on record and approached a bear market as a strengthening dollar and coronavirus fears hammer precious metals and other raw materials.

Palladium futures slumped as much as 28% on the New York Mercantile Exchange, the most in records going back to 1986. The abrupt turn comes after shortages of the metal used in pollution-control devices pushed prices up by more than half last year.

Fears of economic fallout from the virus, along with slowing Chinese car sales, are now battering the commodity. Investors are rushing to the greenback amid the massive sell-off in U.S. equities, with an index of the dollar rising the most since 2016.

“Physical markets are yet to feel the full impact of the hit to end-use demand,” Citigroup Inc. analysts led by Ed Morse said in a note. “For example, palladium is still being processed into auto-catalysts ex-China while autos sales are very weak globally. This won’t go on.”

Car sales globally are expected to decline 2.5%, Moody’s said, while LMC Automotive sees a retrenchment of as much as 4.4%. The U.S. is set to see a decline of about 9% this year, Morgan Stanley expects. In China, sales are set to slump by 8% in 2020 as the coronavirus weaken consumer demand.

Palladium futures for June delivery dropped 28% to $1,615.20 an ounce at 11:44 a.m. on the Nymex. A settlement at or below $2169.36 would be at least 20% below the closing peak in late February, marking a bear market.

Platinum futures for April delivery declined 13% to $759.90 an ounce on the Nymex. A close at or below $820.48 would put the metal into a bear market.

On the Comex in New York, gold futures slid 4.4% and silver fell 6.6%.

(By Justina Vasquez)

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