Palladium price heads for biggest one-day gain in two months on short covering

Spot palladium was up 7.9% at $932.14 per troy ounce by 1653 GMT. This was the metal’s biggest one-day gain in two months. Prices had touched their lowest in more than five years of $849.13 on Tuesday.

“We believe some short positions are getting covered which was to be expected at one point in time,” said Dominik Sperzel, co-head of trading at Heraeus.

Last week, palladium had fallen below platinum for the first time since 2018. Its strong growth on Wednesday took back the premium as platinum had a smaller daily rise – of 2.5% to $893.95 per ounce.

“The outsized gross short positioning in the white metals is a major factor where palladium usually leads the pack,” said Nicky Shiels, head of metals strategy at MKS PAMP SA.

The supply and demand balance for palladium remains unchanged.

The auto sector accounts for 80% of demand for the metal, which fell by 39% in 2023 due to its replacement with cheaper platinum in the autocatalysts curbing harmful emissions and rising market share of battery-powered electric vehicles.

South Africa, Russia and North America are the main producers of palladium, but the majority of mined output comes in a basket with other metals, limiting producers’ ability to reduce palladium production even when the market price is below their costs.

“The build in open interest over the past few sessions suggests a short covering rally may have helped to lift prices,” said Standard Chartered analyst Suki Cooper.

Palladium could regain the $1,000 threshold in the near term if supply cuts arrive or positive demand surprises trigger a short covering rally, Cooper added.