Palladium rallies 3% on supply shortage concerns

Palladium prices rose during Monday trading amid a decline in the dollar against most major currencies and concerns over a shortage of the industrial metal.

In China, the world’s largest consumer of industrial metals, the central bank kept benchmark lending rates unchanged for the fourth consecutive month in September, in line with market expectations, following last week’s decision to hold the key policy rate steady.

The stable fixing of the Loan Prime Rate (LPR) reflects the authorities’ cautious approach toward monetary easing, at a time when US–China trade relations show some easing, alongside resilient exports and recent gains in the stock market, despite signs of domestic slowdown and the Federal Reserve’s move toward monetary easing.

The one-year LPR was left unchanged at 3.0% on Monday, while the five-year LPR also held steady at 3.5%.

A Reuters poll conducted last week of 20 market participants showed that all respondents expected no change in either rate, despite the recent wave of weak economic data.

The People’s Bank of China had also kept the seven-day reverse repo rate, which has now become the main policy tool, unchanged last week.

Recent data indicated that industrial output and retail sales in August recorded their weakest pace of growth since last year, highlighting economic challenges and a slowdown in domestic activity.

For his part, US President Donald Trump said that he and his Chinese counterpart Xi Jinping had made progress on a deal concerning the implementation of TikTok, and that they will meet face-to-face in six weeks in South Korea to discuss trade issues, illicit drugs, and Russia’s war in Ukraine.

At the same time, Chinese equities continued to post strong gains, with the Shanghai Composite Index (.SSEC) hovering near its highest levels in a decade.

Elsewhere, the US dollar index fell by 0.1% to 97.5 points by 15:38 GMT, after recording a high of 97.8 and a low of 97.3 points.

In trading, palladium futures for December delivery rose 2.98% to $1,204.5 per ounce by 15:39 GMT.