Hedge funds just made an abrupt about face in the palladium market as U.S. sanctions against Russian titans spark concerns that the world's largest producer of the metal will get caught in the cross hairs.
After the U.S. slapped penalties on United Co. Rusal, American officials have sent conflicting signals about whether fresh sanctions will be imposed on other companies owned by oligarchs, such as MMC Norilsk Nickel PJSC.
The miner controls about 40 percent of the world's palladium market. The turmoil sent prices for the metal to a seven-week high, and money managers increased their wagers on a rally by the most since June.
"This is very much driven by the uncertainty of Norilsk Nickel supply in the world," said Suki Cooper, a precious metals analyst at Standard Chartered Bank. "There's not an acute shortage in palladium at the moment, but there are real concerns that we might face that."
Palladium had fallen about 16 percent this year through April 6, when the U.S. first announced the sanctions against Russian individuals and companies. The decline came amid concerns that 2017's 55 percent surge has sent prices too far too fast. Since the sanctions, prices have rebounded about 14 percent.
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