As with other precious metals, the strength posed by the US dollar also curbed the appeal of dollar-denominated palladium. The current year saw volatility in precious metals, and the worst performer remained palladium.
Palladium futures fell close to 30% on a year-to-date basis. This fall in prices was led by the prevailing negative sentiment in precious metals, which can be further hurt by the rise in interest rates.
Palladium experienced a considerable increase after the September 18 Volkswagen scandal, which boosted the use of gasoline-powered cars as compared to diesel-powered cars. Palladium is used as a catalyst in gasoline-powered cars, and the scandal prompted a move to gasoline instead of diesel cars.
Such a rise in demand for gasoline cars boosted the appeal of palladium. However, the surge of almost 16% in less than a month was unable to reach the year’s peak of $825 per ounce.
Rise and fall
Palladium recently touched its nearly five-year low level of $525.70 per ounce on December 2. Before the Federal Reserve meeting, the fall in the price precious metals signaled the falling appeal of these metals in the face of a possible rise in interest rates. Palladium has been more volatile as compared to the other three precious metals—gold, silver, and platinum—as depicted in the above graph.
The drop in the price of palladium was also replicated by the Physical Palladium Shares ETF (PALL). Palladium seems to be an unattractive victim of the rate-rise conundrum, just like other commodities.
The rout in palladium’s price also extended to mining-based stocks Barrick Gold Corp. (ABX), Newmont Mining (NEM), and Randgold Resources (GOLD). These stocks fell 24.2%, 0.2%, and 2.9%, respectively, on a year-to-date basis. These three stocks make up 17.1% of the VanEck Vectors Gold Miners ETF (GDX).