Palladium drops to 13-day low on Russia-Ukraine talks
iNVEZZ.com, Wednesday, September 3: After falling the most in more than 11 weeks yesterday, palladium futures extended losses today and touched their weakest in 13 days after Ukrainian president Petro Poroshenko said he agreed a ceasefire with Russian counterpart Vladimir Putin. Russia accounts for 40 percent of global palladium supplies according to the Wall Street Journal.
According to Poroshenko’s official website, he “had a phone conversation with President of Russia Vladimir Putin […] The conversation resulted in an agreement on ceasefire regime in the Donbas. The parties reached mutual understanding on the steps that will facilitate the establishment of peace.”
The Ukrainian president’s office retracted an earlier version of the statement that used the words “permanent ceasefire,” after Kremlin spokesman Dmitry Peskov said: “Putin and Poroshenko did in fact discuss steps that would provide for a ceasefire between the militia and the Ukrainian armed forces. Russia cannot physically agree on a ceasefire because it isn’t a party in the conflict,” RIA Novosti reported.
On the New York Mercantile Exchange (NYMEX), palladium futures for December delivery fell 1.05 percent, or $9.25 a troy ounce, to $874 as of 14:34 BST. They finished 2.89 percent lower yesterday, the largest daily percentage fall since June 12, despite having reached an intraday high of $913 – their strongest since February, 2001.
Commodity futures endured losses across the board yesterday: Gold and silver each fell 1.7 percent, platinum 1.11 percent, and henry hub natural gas 4.26 percent. The Dow Jones Commodity Index (DJCI), which contains 23 commodity futures contracts across energy, metals, agriculture and livestock sectors, fell 1.09 percent.
Robin Bhar, an analyst at Societe Generale SA in London, told Bloomberg: “This morning’s news flow just increases uncertainty.” Although the news on an agreement should cause prices to drop, the metal’s “fundamentals are robust” and this week’s fall may be a buying opportunity, argued Bhar.
The metal has gained 22 percent in the year-to-date, as demand for use in catalytic converters, which reduce harmful emissions, rose and because a five-month mine strike that ended in June in South Africa, the world’s second-largest producer, reduced supplies. Palladium recorded a seventh month of advances last month that was the longest such rally since January 2011.
UBS analysts said in a note yesterday: “Palladium ETFs were down by 125.26koz [in August], after posting the largest daily outflow on August 26 – up until then the net flow was actually positive at 4.29koz. August outflows in palladium were the largest since September 2011. Holdings in the two South African palladium funds that were launched in Q2 this year seem to have stabilised at a combined amount of around 967koz – growth has certainly slowed versus the first few months after they were launched, with NewPalladium actually posting a very small decline of 139oz during the month.”
The analysts had earlier expressed concern about the metal’s extended positioning. “Palladium gross longs currently sit at 99% of the all-time high, while gross shorts are at the lowest since December […] the latest Commitment of Traders Report only adds to our nervousness,” they said on Monday.
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