Palladium prices declined during Friday’s trading, attempting to pause after technical buying that lifted most precious metals, including silver, which recently reached record levels, amid ongoing uncertainty over US Federal Reserve policy.

Daily price movements in palladium are influenced by the same factors that guide overall performance across the precious metals complex, most notably US interest rate expectations, the strength of the dollar, and investor risk appetite.

These developments carry particular importance because palladium, like gold and silver, is globally priced. When expectations tilt toward interest rate cuts or a weaker dollar, non-yielding assets typically benefit, while heightened economic data risks can prompt short-term risk-reduction moves in metals markets.

Reuters also highlighted that delays or gaps in US economic data collection, resulting from the US government shutdown, add further complexity to the economic outlook and introduce an additional layer of uncertainty for traders when positioning their investments.

Key demand headline for palladium: Europe rethinks internal combustion engines by 2035

One of the most significant new catalysts shaping the medium-term demand narrative for palladium emerged on December 16, amid signals that the European Commission may soften its stance on banning new internal combustion engine vehicles by 2035.

Reuters reported that the European Commission is preparing to roll back the current plan by allowing the continued sale of some vehicles that are not fully electric, under strong pressure from major member states and the automotive industry. Under the proposal cited by the agency, the emissions reduction target would be revised from a 100% cut to 90% by 2035 compared with 2021 levels, potentially extending the lifespan of plug-in hybrids and range-extender vehicles.

In a separate report, Reuters noted that the European Commission is also considering a compensation mechanism that could allow internal combustion engine vehicles to continue being sold after 2035, through measures that include alternative fuels and accounting for green steel.

Why does this policy shift matter for palladium price expectations?

Palladium is closely tied to internal combustion engines due to its use in catalytic converters that reduce harmful emissions in gasoline engines. As a result, extending the life of hybrid vehicles and internal combustion engines in Europe — if legally approved — could slow the erosion of palladium’s core demand base.

Reuters quoted a commodities strategist at WisdomTree as saying that this policy shift is “likely to be supportive for internal combustion engine vehicles,” which rely on platinum and palladium.

In short, even modest adjustments to the expected timeline for the decline of internal combustion engines can feed through to palladium’s future demand curve, influencing speculative positioning and longer-term price expectations.

Supply and balance: the concept of “deficit” changes depending on investment demand

Alongside demand developments, the palladium market is also responding to supply-demand balance signals, particularly those issued by Russia’s Norilsk Nickel (Nornickel), the world’s largest palladium producer.

According to a December 16 analytical note published by FXStreet, citing Commerzbank commodities analyst Carsten Fritsch, Nornickel’s updated outlook can be summarized as follows:

For 2025, Nornickel expects the palladium market to be balanced when investment demand is excluded, but to show a deficit of about 200,000 ounces when investment demand is included.

For 2026, excluding investment demand, the company expects a deficit of 100,000 ounces.

Mining.com, citing Reuters reports, reaffirmed the same figures: balance in 2025 without investment demand, a 200,000-ounce deficit when it is included, and a 100,000-ounce deficit in 2026 excluding investment activity.

Investor takeaway

When reading headlines about a “deficit in the palladium market,” attention should be paid to the fine print: does the deficit include investment demand or not?

In a small and concentrated market like palladium, shifts in ETF flows or physical investment demand can materially alter the supply-demand balance — and, in turn, price sentiment.

This investment dimension was also highlighted in broader commentary on precious metals. A daily report from the India Bullion and Jewellers Association dated December 16 noted that palladium has risen by about 25% since the start of the rally, alongside strong gains in silver and platinum, illustrating how momentum has rotated from gold into the wider precious metals complex.

Outlook and forward view: where is palladium headed in 2026?

Strong palladium gains during 2025 have prompted analysts to reassess scenarios for 2026. The market currently stands at the intersection of two competing narratives:

Structural support factors include tight supply, concentrated production, and political developments that could extend demand for internal combustion engines and hybrid vehicles.

Structural headwinds include the long-term shift toward fully electric vehicles and substitution risks, which may cap upside for a metal heavily dependent on gasoline exhaust catalysts.

The most widely cited forecasts as of mid-December 2025 include:

Morgan Stanley expects palladium prices to reach $1,325 per ounce in 2026, alongside higher forecasts for platinum, driven by structural imbalances and divergent demand drivers.

Heraeus Precious Metals projected a wide 2026 palladium price range between $950 and $1,500 per ounce in a December 8, 2025 report, warning of a potential expansion in surplus if demand for catalytic converters weakens as electric vehicle penetration rises.

The World Platinum Investment Council expects a slight deficit in the palladium market during 2025, followed by a shift to a modest surplus in 2026 under its base-case scenario.

A Reuters survey showed the average 2026 forecast at $1,262.50 per ounce, up from $1,100 in the previous survey, reflecting a change in sentiment after the strong 2025 rally.

During US trading hours on Friday, March palladium futures were down 0.4% at $1,768 per ounce as of 14:34 GMT.

Bitcoin was largely steady on Friday near the $87,000 level, after moving within tight ranges earlier in the week, as investors assessed US inflation data that came in weaker than expected, strengthening expectations of future interest rate cuts by the Federal Reserve.

The world’s largest cryptocurrency was trading up 0.6% at $87,121.6 as of 01:52 AM US Eastern Time (06:52 GMT).

Bitcoin is on track to post a weekly decline of about 4%, extending a period of sideways movement following strong gains earlier this year. The cryptocurrency spent most of the past week confined within a narrow price range.

Bitcoin remains range-bound

Bitcoin has repeatedly failed this month to stage a sustained rebound above the $90,000 level, which is considered a key psychological resistance.

Weak liquidity, which is typical of late-December trading, has also reinforced investor caution and limited the durability of short-term rallies. Trading volumes remained low, leaving prices more sensitive to modest capital flows and encouraging continued range-bound trading.

Weaker US consumer price index boosts easing bets

The world’s largest cryptocurrency showed a limited immediate reaction to US consumer price data released on Thursday, which came in weaker than expected, with annual inflation at 2.7%.

Thursday’s data reinforced market bets that the Federal Reserve could move to cut interest rates at a faster pace during 2026. Interest rate futures now reflect rising expectations toward monetary easing in early 2026, as easing price pressures reduce constraints on policymakers.

Lower interest rates typically support high-risk assets by reducing the opportunity cost of holding non-yielding investments such as Bitcoin.

In the absence of major cryptocurrency-specific developments to lift sentiment, inflation data alone was not enough to drive a decisive rally in Bitcoin.

New York Stock Exchange owner plans investment in crypto payments firm MoonPay – Bloomberg

Bloomberg reported, citing people familiar with the matter, that Intercontinental Exchange Inc, listed on the New York Stock Exchange under the ticker (NYSE: ICE) and the owner of the NYSE, is in talks to invest in crypto payments firm MoonPay as part of a new funding round.

According to the report, New York-based MoonPay is close to completing the fundraising process and is targeting a valuation of around $5 billion.

These talks highlight growing Wall Street interest in digital assets amid a more favorable US political environment under President Donald Trump.

Cryptocurrency prices today: altcoins muted as they track Bitcoin

Most alternative cryptocurrencies posted limited or near-flat moves on Friday.

Ethereum, the world’s second-largest cryptocurrency, rose 1.8% to $2,926.92.

By contrast, XRP, the third-largest cryptocurrency globally, was largely unchanged at $1.84.

Oil prices edged higher on Friday, but were on track to post a second consecutive weekly decline, as expectations of a potential supply surplus and prospects for a peace deal between Russia and Ukraine capped gains, despite concerns over possible supply disruptions linked to a blockade of Venezuelan oil tankers.

By 12:30 GMT, Brent crude futures rose 25 cents, or 0.4%, to $60.07 a barrel, while US West Texas Intermediate crude gained 20 cents, or 0.4%, to $56.35 a barrel.

On a weekly basis, Brent and WTI were down 1.7% and 1.9%, respectively.

Analysts widely expect a global oil supply surplus next year, driven by higher output from the OPEC+ producer group, alongside the United States and other producers.

Ole Hansen, head of commodities strategy at Saxo Bank, said: “Staying at these low levels suggests the market is currently well supplied. There is enough oil available to absorb any potential disruptions.”

Tony Sycamore, an analyst at IG, said on Friday that uncertainty over how the United States would implement President Donald Trump’s intention to prevent sanctioned tankers from entering or leaving Venezuela has helped restrain geopolitical risk premiums.

Sources familiar with Venezuelan oil exports said that Venezuela, which produces about 1% of global oil supply, allowed two non-sanctioned cargoes to sail toward China on Thursday.

Optimism over the possibility of a US-led peace agreement on Ukraine has also helped ease supply risk concerns, according to Sycamore.

By contrast, analysts at Bank of America said they expect low oil prices to curb supply growth, which could prevent prices from entering a sharp and disorderly downward trajectory.

The yen slipped in choppy trading on Friday after the Bank of Japan delivered a widely expected interest rate hike, while Governor Kazuo Ueda offered limited guidance on the timing of future increases, even as he kept the door open to further monetary tightening.

The yen initially weakened against the dollar after the Bank of Japan raised its policy rate to 0.75% from 0.5%, a move that had been clearly signaled by policymakers, prompting traders to sell the currency on the news.

Losses in the Japanese currency deepened following Ueda’s post-meeting press conference, where he remained vague about the precise timing and pace of future rate hikes. In its latest trading, the yen was down 0.6% at 156.53 per dollar.

The euro climbed to a record high of 183.25 yen, while sterling rose 0.52% to 209.16 yen.

In a statement on Friday, the Bank of Japan maintained its view that core inflation will converge toward its 2% target in the second half of the three-year forecast period through fiscal year 2027.

However, two more hawkish board members, Hajime Takata and Naoki Tamura, dissented. Takata said core inflation had already reached the target, while Tamura argued it would do so earlier, around the middle of the three-year outlook period.

Bart Wakabayashi, head of Tokyo trading at State Street, commented on the Bank of Japan’s decision earlier on Friday, saying: “It feels like there is an ongoing debate, and the market reaction we’re seeing, in my view, is really about the Bank of Japan’s next steps… It doesn’t look like they have fully made up their minds about another hike.”

He added: “I think there is some consensus that 1% or 1.25% is roughly the neutral rate at this stage, but it appears the path for the Bank of Japan to get there will be a bit steeper.”

The Bank of Japan reiterated that real interest rates remain at “significantly low” levels even after the hike, and pledged to continue tightening if economic and inflation conditions evolve in line with its projections.

Euro steadies as Lagarde pushes back against hawkish pressure

Overnight, the dollar briefly weakened following a sharp and unexpected drop in US inflation, but investors questioned the reliability of the data due to disruptions caused by the US government shutdown, and the move quickly faded.

Sterling swung between gains and losses before settling at $1.3374, after the Bank of England cut interest rates to 3.75% as expected. However, the decision was passed by a narrower majority than markets had anticipated, potentially limiting the scope for further easing.

The euro was steady at $1.1719 in Asian trading, after European Central Bank President Christine Lagarde refrained from offering forward guidance and said all options remained on the table, a stance that markets interpreted as a pushback against more hawkish voices.

Analysts at ANZ said in a note to clients: “In recent weeks, hawkish comments from ECB executive board member Schnabel have shifted the market’s assessment of future policy risks. But the balanced tone suggests that Schnabel’s view that the next move is more likely to be a rate hike does not have broad support within the council.”

The ECB kept its policy rate unchanged at 2%, in line with expectations.

On the political front, European Union leaders agreed on Friday to borrow funds to finance Ukraine’s defense against Russia over the next two years, instead of using frozen Russian assets, sidestepping disagreements over an unprecedented plan to fund Kyiv with Russian sovereign money.

Norway and Sweden hold rates steady

The Norwegian krone slipped slightly to 10.18 per dollar after the central bank kept interest rates unchanged at 4% and signaled it was in no rush to cut them. The Swedish krona showed little reaction after rates were also left unchanged, as expected.

The Australian dollar fell 0.2% to $0.6601, while the New Zealand dollar declined 0.5% to $0.5748.

The Chinese yuan remained firm in onshore trading, hovering near a more-than-one-year high reached on Thursday. The dollar index rose 0.2% to 98.64.

Cryptocurrencies rebounded on Friday, with bitcoin up 2.5% at $87,752.22, while ether climbed more than 4% to $2,951.26.