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17 Jan, 2019 13:22

All that glitters isn't gold: Palladium hits all-time record as deficit boosts prices

All that glitters isn't gold: Palladium hits all-time record as deficit boosts prices

The price for palladium has surged to record-high levels on lower supply and increasing demand for the precious metal that is vital for the auto-making industry. It continues to beat gold as the world's best commodity investment.

Spot palladium soared five percent to $1,427 per ounce, having risen more than 10 percent so far this month. Spot gold increased by just 0.1 percent to $1,294.22 an ounce against a backdrop of various geopolitical concerns, including the US government shutdown, China’s economic forecast, Brexit, and US’ pending tariffs on European vehicles.

The price for palladium, which is commonly used in emissions-reducing catalysts for vehicles, has skyrocketed more than 60 percent since mid-August. In December, palladium price overtook gold for the first time in 16 years, making the precious metal the most expensive in the world.

“Any new high in the market is triggering additional buying… It is a good old-fashioned squeeze driven by tight fundamentals, strong momentum and low liquidity,” Saxo Bank analyst Ole Hansen told Reuters.

The latest move higher may be linked to short covering, according to Michael Matousek, head trader at US Global Investors, as quoted by CNBC.

A sustained period of record palladium automotive demand, with last year’s estimate of 8.5 million ounces, coupled with constrained mine production growth has led to demand outpacing supply over much of the current decade, reads a note from Metals Focus seen by the agency.

“In the long run, we believe that palladium will continue to benefit from exceptionally strong supply-demand, resulting in yet higher prices. However, in the near future, we believe that palladium is due a correction,” the consultancy said.

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