Palladium prices are seeing a significant amount of upside and even after they set a fresh two-year high on Thursday they saw more strength on last Friday. Palladium futures for May delivery closed up 1.7%, taking their weekly advance to 5.8%.
Palladium garnered some strength from increased demand for safe haven investments due to the US political climate while a pullback in the value of the US dollar added extra upside impetus. However, driving the majority of the gains was solid economic data and demand from the automotive sector.
the upside came as the European Central Bank said that the economic recovery is underway while a rise in European car sales in February also added to the upside. Palladium is used in catalytic converters, particularly diesel engines. European consumers purchase more diesel vehicles; therefore, solid automotive demand from the region is a positive for palladium and resulted in the commodity’s aggressive gains posted this week.
February European Union car sales came in at 1,333,637 cars and light trucks, 2.2% higher. That may seem like a disappointing reading, but after January’s aggressive, double-digit gains market participants digested it as a positive as there were concerns that January’s large advance would lead the way to a retraction in February.
Meanwhile, there was a general flight to safety this week as political wrangling in the US caused investors to turn risk-averse. This benefited all the precious metals, and investors were also attracted to palladium.