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PRECIOUS-Palladium hits 13-1/2 year high of $910/oz on Ukraine worries
September 1, 2014 / 10:22 AM / 3 years ago

PRECIOUS-Palladium hits 13-1/2 year high of $910/oz on Ukraine worries

* Palladium set for 4th session of gains

* Markets watch for any further Western sanctions on Russia

* U.S. markets closed for Labor Day holiday (Updates prices, adds comment)

By Clara Denina

LONDON, Sept 1 (Reuters) - Palladium rose to a 13-1/2-year high of $910 an ounce on Monday on fears that possible Western sanctions against Russia over the Ukraine crisis could hit supply from the world’s top producer of the metal, while gold nudged higher.

Ukrainian President Petro Poroshenko warned a “full-scale war” was imminent if Russian troops continued an advance in support of pro-Moscow rebels as Europe and the United States threatened Russia with new sanctions.

Russian President Vladimir Putin called on Sunday for immediate talks on the “statehood” of southern and eastern Ukraine and his Foreign Minister Sergei Lavrov gave a strong hint on Monday that Russia would retaliate to European sanctions with its own measures.

Spot palladium rose as high as $910 an ounce, the highest since February 2001, and was up 1 percent at $907.97 by 1449 GMT, heading for its fourth straight session of gains on worries the escalation of tensions over Ukraine could result in an extension of sanctions to include palladium producers.

Russia accounted for more than 40 percent of global palladium supply last year, with mining output at around 2.7 million ounces.

“Palladium could go higher... towards the $1,000 mark ...it is not going to go there in one quick move but the metal has a got a strong technical picture and a couple of fundamental reasons why it’s performing well,” Credit Suisse analyst Tom Kendall said.

“People are thinking there is a sort of a tail risk, if the situation in Ukraine really does get much worse, that the whole commerce with large Russian entities could be constrained although I don’t think it is a realistic prospect.”

The metal, mostly used in autocatalysts to clean up exhaust emissions, was also supported by strong demand prospects from the automotive sector.

It has gained 27 percent since the start of the year, making it the best performing precious metal.

GOLD STEADIES

Gold failed to benefit strongly from warnings that Russia’s conflict with Ukraine was sliding out of control, which would usually increase demand for assets perceived as safer.

Spot gold was unchanged on the day at $1,286.90 an ounce, tentatively extending a small gain posted in the previous week. Liquidity was low as U.S. markets are closed for the Labor Day holiday.

The dollar was flat against a basket of currencies but was still trading near a 13-month high, while European equities were also little changed.

“The focus this week will be on the U.S. August nonfarm payrolls due on Friday, while remaining sensitive to headlines relating to geopolitical risks,” UBS said in a note. “Price action is likely to be choppy heading into the key data release.”

Holdings of the SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund and a gauge of investor demand, fell 0.6 tonnes to 795 tonnes on Friday.

Hedge funds and money managers decreased their bullish futures and option bets in gold for a second consecutive week as a rally in U.S. equities sapped demand for the safe-haven metal, data from the Commodity Futures Trading Commission showed on Friday.

Physical demand for bullion remained subdued in August, with the U.S. Mint seeing a 17 percent month-on-month drop in sales of American Eagle gold coins.

Spot silver was flat at $19.44 an ounce, while spot platinum lost 0.1 percent to $1,418.25 an ounce. (Additional reporting by A. Ananthalakshmi in Singapore; Editing by Michael Urquhart and David Evans)

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