Rumours have been gathering pace suggesting that a deal worth around €23 million (£20m/$26m) had been agreed between Real and River Plate for the midfielder.
However, Palacios’s representative Renato Corsi was quick to quell these reports, instead suggesting that it was in fact Inter who had shown the strongest interest in his client.
Corsi told Argentine radio station El Mundo: “Nobody called me from Real Madrid because of Palacios – [Inter vice-president Javier] Zanetti called to let me know that they are following him because he is a player that interests them, but only that.”
He added: “With Inter we spoke, we did not commit to anything. They love the player, Zanetti told me they are following him.”
Palacios made his first-team debut for River Plate at the age of 17 and has since established himself as an integral part of a side that finished eighth in Argentina’s Primera Division last season, winning the Copa Argentina en route.
The 20-year-old has impressed so far this season and has picked up two full international caps since Argentina’s disappointing World Cup campaign in Russia over the summer.
Despite signing Belgian star Radja Nainggolan during the summer transfer window, Luciano Spalletti’s side have been heavily linked with a move for midfield reinforcements, with Real’s Luka Modric consistently touted as a possible arrival at the San Siro.
Given Palacios’ age it is not unlikely that Inter could be interested in signing him as a prospect regardless of the outcome of their pursuit of the Croatian.