Palladium futures fell below $1,900 an ounce, retreating from a half-month high of $1,958, as investors locked in profits. Nevertheless, the metal remains near a 3-year peak, underpinned by rising bets on Federal Reserve rate cuts and safe-haven demand. December US inflation came in at a moderate 2.7% year-on-year, easing concerns over mounting price pressures and prompting markets to price in two 25bp cuts this year. Investor concerns over the Fed’s independence have grown after Chair Jerome Powell came under a criminal investigation by the US Department of Justice, seen as pressure on the central bank. Geopolitical risks are mounting, as investors monitor violent crackdowns on protests in Iran, US threats of potential intervention, and the imposition of a 25% tariff on any country trading with Iran. Fundamentally, the palladium market is set to shift from a supply deficit to a surplus by 2026, while demand remains strong, supported by the EU’s easing of its 2035 ICE vehicle ban.
