Palladium prices jumped to 17-year highs on Friday as strong demand from autocatalyst makers reinforced the prospect of market shortages, while gold rose for the sixth straight session to reach a 2-1/2-week high on weak US economic data. Spot palladium turned down 0.06 percent to $1,037.15 per ounce by 1:50 pm EST (1850 GMT), after rising to $1,042.50, its highest since February 2001, though slowing car sales are expected to challenge further gains. It was on track to close 2017 up more than 50 percent, its strongest annual performance since 2010.
Analysts think about 80 percent of global palladium demand will come from autocatalysts for gasoline powered cars, which many now prefer over diesel fueled vehicles. "Diesel's share of the European auto market is falling and the flip side of that is gasoline's share is rising," said Julius Baer analyst Carsten Menke.
"Chinese car sales supported palladium, but there will a reality check as tax incentives are removed. In Europe and the United States car sales look to be peaking." GFMS analysts said in a recent research note that next year is set to be the seventh successive year of large deficits in the palladium market.
Shortages have in recent years been partly offset by investors selling their holdings in physically backed exchange-traded funds Spot gold was up 0.55 percent at $1,273.61 an ounce, after rising to $1.275.98, the highest since December 5. Bullion was on track to see its strongest weekly performance since mid-October.
US gold futures settled up 0.7 percent at $1,278.80. The futures market will be closed for the Christmas holiday on Monday. US growth prospects dimmed on Friday as data showed spending outpaced income in November and the Federal Reserve's preferred inflation measure - the personal consumption expenditures price index that excludes food and energy - rose by just 0.1 percent in November. Silver added 1.5 percent to $16.35 an ounce.
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