Palladium slides more than 10% as shortage fears ease; gold falls 1%

Palladium slumped more than 10% on Monday, erasing the bulk of a rally that had taken it to record highs during the Ukraine crisis, as supply worries eased. Amid cautious hopes for progress in peace talks, gold also fell more than 1%.

Autocatalyst metal palladium XPD=, of which Russia is the biggest producer, was down 9.4% to $2,552.23 per ounce by 1321 GMT, facing its biggest daily percentage drop in at least nine months. It fell as much as 11.1% earlier in the session.

Tentative hopes of progress in peace talks between Ukraine and Russia lifted equity markets, despite a sharp slide in Chinese stock markets amid renewed COVID-19 lockdowns.

"Palladium over-reacted in the first place." StoneX analyst Rhona O'Connell said. "The rally we've seen has been built on straw, rather than on concrete." There was no clear supply disruption and very little industrial demand, she added.

Russian mining giant Nornickel's GMKN.MM biggest shareholder told Russian RBC TV on Saturday the group has managed to secure alternative routes for its palladium deliveries even as it faced logistics constraints.

A market authority said last week that Russian refiners can continue to sell platinum and palladium in London, the world's biggest precious metals trading centre.

Platinum XPT= dropped 4% to $1,036.07. Spot gold XAU= dipped 1.3% to $1,960.20 per ounce, while U.S. gold futures GCv1 fell 0.9% to $1,966.80.

While there is a risk-on mood across major markets, "I wouldn't call this (the recent rally) the peak in gold just yet, because this (Ukraine) situation is still uncertain. It's so fluid," Julius Baer analyst Carsten Menke said.

Short-term speculative traders who bought gold due to the war were now possibly booking profits, Menke added.

Also pressuring non-yielding bullion, benchmark U.S. 10-year Treasury yields jumped, as the Federal Reserve is expected to raise interest rates at a two-day meeting this week.

Spot silver XAG= fell 2% to $25.27 per ounce.

 

(Reporting by Bharat Govind Gautam in Bengaluru; Editing by Jan Harvey)