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Palladium prices hit a 17-year high of $1,069.50 per ounce this week, buoyed by high auto sector demand and short supply.
Palladium prices hit a new 17-year high of $1,069.50 per ounce on Wednesday (December 27), buoyed by high demand and short supply.
The precious metal has spent years in deficit, and 2017 is expected to be no different. Predictions vary between firms, but many market watchers see this year’s deficit being higher than the one in 2016; an even greater deficit is widely anticipated in 2018.
“Investors perceive the market to be very tight,” INTL FCStone said in a note this week. According to Reuters, palladium is the top performer in the precious metals complex this year, having risen more than 60 percent over the course of the year.
The chart below outlines palladium’s steady price rise in 2017:
Palladium price from January 1, 2017 to December 28, 2017. Chart via Kitco.
The metal’s slow upward trend has led it through a number of milestones this year. For example, in September, palladium reached price parity with platinum for the first time in 16 years; then, in October, it breached the $1,000 mark for the first time since 2001.
As mentioned, the metal is being pushed up by expectations of strong demand and short supply. The former has come largely from the auto sector — palladium is a key component in the autocatalysts used in gasoline-powered vehicles, which are becoming more desirable than vehicles that run on diesel. Meanwhile, supply has not been sufficient to keep up with growing demand.
Looking ahead, market watchers are increasingly wondering whether palladium can sustain its current high level. All in all, 2018 looks set to be more balanced — while palladium is the preferred metal for autocatalysts for gasoline-powered vehicles, platinum can also be used. A number of firms predict that next year carmakers may begin to take advantage of cheap platinum prices and use it as a substitute.
Unlike its palladium, platinum has had a difficult time in 2017 and looks set to end the year flat.
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Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.