VW scandal will benefit global palladium market

Subject

Developments in the global palladium market.

Significance

The price of palladium has fallen by 29.6% year-to-date, underperforming the Bloomberg Commodity Index by more than 4.0%. The metal broke through the 600 dollars/ounce floor in August and again since November 9. Following releases of positive US economic data, palladium reacted to the dollar's appreciation and to the rise in Treasury yields more like a precious metal than an industrial commodity. On each occasion, investors have liquidated positions across the precious metals sector as the dollar appreciated. After a short-lived rebound caused by the palladium-favouring conclusions from the fallout of the Volkswagen (VW) scandal, technical selling has returned and intensified.

Impacts

• A palladium fund partnering with Norilsk Nickel might buy inventory from Gokhran, but it is unclear how competition regulators will react.
• Russian export duties on palladium will come under scrutiny as the WTO has ordered it to cancel the levies in 2016.
• Volumes of palladium jewellery scrap will increase in China, in a sector affected by monetisation of wealth and capital flight.