• Gold, silver on course for best month since Dec 2020

AMSTERDAM/LONDON: Palladium on Friday raced past the $3,000-an-ounce mark for the first time, driven by concerns about a shortage of the metal embedded in exhaust pipes of automobiles to reduce emissions.

Palladium was up 1% at $2,980.89 per ounce by 10:43 a.m. EDT (1443 GMT) after reaching $3,007.73.

Prices have shot up more than 20% since March 16 when Russia’s Nornickel, the top producer, announced that flooding at two of its mines would reduce output.

“You have auto industry buying more palladium, the electronics industry buying more palladium and hence a tight market,” said Jeffrey Christian, managing partner of CPM Group.

“It’s primarily a speculative surge in demand, and that can go on for a long period of time and keep prices elevated,” he added.

Demand from the auto industry could climb further as a semiconductor chip shortage that has curtailed production eases later this year. Commerzbank analyst Carsten Fritsch said prices were unlikely to remain above $3,000 and would begin to fall as automakers switch from palladium to cheaper platinum.

“At this (price) level, more and more car manufacturers will think about substitution,” he said.

Tightening environmental rules have forced automakers to use more and more palladium in gasoline engines in recent years, but substitution and a shift to electric vehicles may eventually erode demand.

Meanwhile, spot gold eased 0.1% to $1,770.11 an ounce as the dollar gained, making bullion more expensive for buyers with other currencies.

US gold futures were up 0.1% at $1,769.80.

“Right now there is an increase in investor and consumer confidence in the state of the world and in the state of the US economy, and therefore the state of the dollar,” CPM Group’s Christian said.

Gold is up 3.7% this month, its best showing since December.

Silver was flat at $26.08 an ounce and up about 7% in April - its biggest monthly gain since December.

Platinum gained 0.9% to $1,208.80.