A record 22 percent slump in China's January car sales is threatening to derail the rally in palladium, used to curb emissions from vehicles.
The precious metal generated a 59 percent return for investors last year, the most of any commodity tracked by a DCI BNP Paribas gauge. The rally was fueled by expectations that stricter Chinese environmental standards will spur higher loadings of the material in cars. The bullish sentiment is wavering, with hedge funds paring their bets on higher prices to an eight-month low.
On Thursday, the China Passenger Car Association predicted a worsening outlook for the industry, saying sales may drop more than 30 percent this month. The coronavirus that spurred factory shutdowns in China has also disrupted the global supply chain, prompting Nissan Motor Co. and South Korea's Hyundai Motor Co. to halt some operations in their home countries due to shortages in auto parts.