Surging auto sales in China could give a lift to palladium, a precious metal that has a critical industrial function in the catalytic converters of cars and trucks.

The China Association of Automobile Manufacturers reported passenger vehicle sales were up by 7 percent, year over year, and sales are expected to continue to grow year over year in September and October, said Suki Cooper of Barclays Capital.

The analyst said that bodes well for palladium given the low level of local stocks.

The news will be welcomed by investors in palladium. Prices of palladium closed Friday down by 2.5 percent and technical indicators signal a negative momentum for the metal.

Palladium closed on floor trading in New York's futures exchange Monday at $738.60, a decline of $26.70.