April 23, 2018 / 10:47 AM / a month ago

RPT-PRECIOUS-Palladium plunges as U.S. hints at Russia sanctions relief

    * U.S. may give Rusal sanctions relief if Deripaska cedes
control
    * Treasury yields near 3 pct rattle U.S. stocks, boost
dollar

 (Updates prices; adds technical comments, byline, NEW YORK to
dateline)
    By Renita D. Young and Maytaal Angel
    NEW YORK/LONDON, April 23 (Reuters) - Palladium sank more
than 5 percent on Monday amid U.S. hints it might relieve
sanctions on Russia's Rusal          , while gold hit a two-week
low as investors piled into the dollar with U.S. Treasury yields
approaching 3 percent.
    The United States said it could give sanctions relief to
Russian aluminum giant Rusal if Russian tycoon Oleg Deripaska
cedes control of the company, easing fears that Washington might
extend sanctions to major palladium producer Nornickel
         . Deripaska is among seven Russian oligarchs sanctioned
by the United States as part of a larger action targeting
Moscow's "malign activities" around the world.             
    Nornickel, by far the world's largest palladium producer, is
linked with both Rusal and Deripaska, and fears it might also be
targeted by U.S. sanctions have sent prices soaring ever since
April 6, when the current sanctions were imposed. 
    Spot palladium        dropped more than 5 percent to a
session low of $971.72 an ounce, but were trading down 4.4
percent at $984.70 per ounce by 2:01 p.m. EDT (1801 GMT). Spot
gold        dropped 0.9 percent to $1,323.40 per ounce, having
touched a more than two-week low of $1,322.81.
    "Palladium might hold the 200-day moving average at $964.30
per ounce," said Phillip Streible, senior commodities strategist
at RJO Futures.
    The U.S. dollar rallied to a seven-week high after a rise in
U.S. benchmark 10-year Treasury yields             to within a
whisker of the psychologically important 3-percent level. A
stronger dollar makes dollar-priced gold costlier holders of
other currencies.                   
    "If we break above (3 percent) it will be first time in five
years this has happened and this increases opportunity cost of
holding (non-yielding) gold," said Mitsubishi analyst Jonathan
Butler.
    But he said the reason yields were rallying was because U.S.
interest rates were expected to climb due to the quickening pace
of inflation.
    "If inflation is rising, gold provides a hedge," he said,
adding there was also longer-term upside for gold from
geopolitical tensions and a U.S. currency stuck in a long-term
downtrend as global central banks begin raising rates.
    U.S. gold futures         for June delivery settled down
$14.30, or 1.1 percent, at $1,324 per ounce. 
    Gold, seen as a safe haven in times of political turmoil,
was also under pressure after North Korea said at the weekend it
would suspend nuclear and missile tests before planned summits
with South Korea and the United States. 
    Added to this development were signs that U.S.-China
relations might be thawing.             
    "We're getting down to the bottom of the range. Looks like
the next support level would be the 100-day around $1,318 per
ounce," said Ryan McKay, commodity strategist at TD Securities.
    Spot silver        fell 2.8 percent at $16.63 per ounce
while platinum        dipped 0.2 percent at $920.30 an ounce,
having hit a two-week low of $910.75.

 (Additional reporting by Apeksha Nair; editing by Mark Potter
and G Crosse)
  
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