Escalating Geopolitical Conflict in the Middle East, Coupled With a Reversal in Rate Hike Expectations, Put Platinum and Palladium Under Pressure for Sharp Declines Last Week [SMM Platinum and Palladium Weekly Review]

[SMM Platinum and Palladium Weekly Review] Last week (March 16–20), front-month NYMEX platinum fell 5.97% during the week to $1,920.1/oz, while front-month NYMEX palladium fell 10.46% to $1,414.5/oz. On the Guangzhou Futures Exchange, the most-traded platinum futures contract PT2606 opened at 530 yuan/g and closed at 509.75 yuan/g, down 42.3 yuan/g from the previous week's settlement price, a decline of 7.66%, with the highest price at 568 yuan/g and the lowest price at 503.2 yuan/g during the week; the most-traded palladium futures contract PD2606 opened at 396.15 yuan/g and closed at 368.85 yuan/g, down 47.3 yuan/g from the previous week's settlement price, a decline of 11.37%, with the highest price at 416.95 yuan/g and the lowest price at 467.7 yuan/g during the week. In futures trading, total trading volume of the most-traded platinum futures contract PT2606 was 39,488 lots during the week, with total turnover of 21.036 billion yuan and open interest of 18,516 lots, with open interest decreasing by 1,473 lots WoW. For the most-traded palladium futures contract PD2606, total trading volume was 16,539 lots during the week, with total turnover of 6.46 billion yuan and open interest of 7,848 lots, with open interest increasing by 236 lots WoW.

Recently, the core logic driving platinum and palladium prices has centered on US Fed monetary policy, safe-haven demand and inflation under geopolitical tensions, trade policy uncertainty, economic stagflation and financial market risks, as well as the upward shift in the cost floor on the supply side.

As geopolitical conflict in the Middle East continued to escalate, the precious metals market as a whole entered a stagflation panic mode. The specific logic was that the larger-than-expected US-Iran conflict pushed up oil prices, triggering concerns over imported inflation in the US and in turn delaying the pace of Fed interest rate cuts. On US Fed monetary policy, the March FOMC meeting concluded with the rate decision keeping the federal funds target range unchanged at 3.50%-3.75%. Miran dissented and advocated an immediate 25-bp interest rate cut, while Waller chose to wait and see. Powell said the current policy rate was at the high end of the neutral range. Economic projections showed that, on inflation, the median expectation for core PCE inflation at the end of 2026 was raised by 0.2% to 2.7%, while overall PCE was also raised by 0.3% to 2.7%; on growth, the 2026 GDP growth forecast was raised from 2.3% to 2.4%; on the rate path, the forecast of a 25-bp cut in 2026 and another 25-bp cut in 2027 was maintained, while the long-term neutral rate was raised by 0.1% to 3.1%. Overall, the pace of rate cuts shifted further back.

Regarding the US-Iran conflict, the US and Israel launched sustained high-intensity airstrikes on Iranian territory, targeting missile positions, military industrial facilities, and energy ports. Iran then responded comprehensively, designating energy facilities in multiple Gulf countries as targets, while shipping security in the Red Sea and the Strait of Hormuz came under severe threat. On March 21, Trump gave Iran 48 hours to open the Strait of Hormuz without posing any threat, or its power plants would be destroyed. On March 22, Iran’s Khatam al-Anbiya Central Headquarters of the Armed Forces emphasized that if Iran’s fuel and energy infrastructure is attacked by hostile forces, all energy infrastructure, information technology systems, and seawater desalination facilities of the US and its allies in the region will become targets of attack. There is currently no room for negotiations or a ceasefire, and the risk of conflict escalation remains high.

Tariffs, after the US reciprocal tariff was overturned by the Supreme Court, policy uncertainty rose, and the Trump administration is seeking a more solid legal basis to reconstruct the tariff system: in the short term, temporary tariffs under Section 122 will fill the tariff-rate vacuum, while in the medium and long term it plans to rely on Sections 232 and 301 to maintain a high-tariff framework. Citing “overcapacity,” the USTR launched a Section 301 investigation into 16 economies including China. On March 16, the China-US economic and trade teams held consultations, and both sides agreed to maintain the stability of bilateral economic and trade relations. In addition, the ruling that the tariffs were unlawful triggered pressure for massive tax refunds, increasing the US fiscal burden and reinforcing expectations of a weaker US dollar.

Supply side, Eskom will raise electricity prices by 8% for each of the next two years, and frequent recent announcements of breakdowns in negotiations with the mining side have led some miners to shut down their international operations, raising concerns over supply disruptions in platinum and palladium.

Strategy, we still maintain a strategic bullish view on precious metals, and regard pullbacks as opportunities to build long positions for the medium and long term, while in the short term the market remains in the doldrums consolidation. On the risk side, stay alert to worsening tensions in the Middle East that could heighten inflation concerns and affect monetary policy, as well as liquidity-driven selling pressure amid recession fears. Under high fluctuations in platinum and palladium, position control warrants attention. Due to the discontinuity between the domestic and overseas market, the opening prices of platinum and palladium often refer to overseas night session conditions, and investors need to pay attention to trading prices in international markets and beware of opening gaps.