Palladium prices and related exchange traded fund are plunging, along with other precious metals, as traders dump dollar-denominated metals on Federal Reserve interest rate speculation ahead of the jobs report.
The ETFS Physical Palladium Shares (NYSEArca: PALL) fell 3.3% Thursday after declining 7.3% over the past week.
Palladium was the worst performing precious metal Thursday, falling 3.2% to $609 per ounce.
Precious metals as a group have been steadily weakening in anticipation that the Fed will raise interest rates in December. Traders are now looking to the Friday jobs report as a major factor in the Fed’s decision to raise benchmark interest rates for the first time in almost a decade, MarketWatch reports.
Friday’s nonfarm payrolls report is expected to reveal an increase of 177,000 jobs with unemployment hovering around 5.1%, according to economists’ forecasts.
Additionally, precious metals are being pressured from a strengthening U.S. dollar after Fed Chair Janet Yellen’s comments Wednesday hinted at a December interst rate lift-off, citing low unemployment, continued growth and faith in higher inflation, Reuters reported. The USD typically has an inverse relationship to precious metals.
“We see further downside potential for the palladium price in view of the currently negative investment demand and speculative positioning,” Commerzbank said in a note, according to Platts.
Palladium prices are experiencing price pressure from excessive production and other fundamental weaknesses. Specifically, increased mining output from key supplier South Africa, slower car sales in emerging markets – three-quarters of palladium demand comes from catalytic converters – and the Volkswagen diesel emissions scandal have all weighed on PGMs.
“The risk of deliveries from Russian stockpiles has not gone away, [and in South Africa]producers need to show more production discipline, putting more ounces into the market at lower cost is not a recipe for success,” Merrill Lynch said in a note.
ETFS Physical Palladium Shares
For more information on the palladium market, visit our palladium category.
Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.