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Can Palladium Win The Award For Best Performing Commodity In 2019?

Published 12/13/2019, 04:07 AM
Updated 09/02/2020, 02:05 AM

In an Oscar-worthy showing, palladium qualified on Thursday as the second costliest metal ever, beating gold after an eight-year struggle. Two nominations now await the auto-catalyst metal: Best Performing Commodity for 2019 and $2,000 Metal Award.

Both titles appear to be within palladium’s reach as its futures are now up 63% on the year — more than any commodity — while its spot price was at a record of $1,966 per ounce at the time of writing, less than $35 from the magical $2,000 target.

Palladium Futures Weekly Price Chart

But given the unpredictable nature of commodity markets — and the sheer volatility possible sometimes in a day — palladium might achieve just one of these honors.

Palladium Still Wouldn’t Achieve Highest Price Ever For A Metal At $2,000

At $2,000 an ounce, palladium might well and truly beat spot gold’s September 2011 record of $1,920.80.

But it will still fall short of another precious metal that had set even higher historic peaks before.And that metal is platinum, often described as sister-metal to palladium. Platinum had gotten to as high $2,276 per ounce just before the financial crisis of 2008 — a record not many may remember or even know, given its contrastingly poorer standing now to palladium.

In Friday’s trade, platinum was cheaper to palladium by more than $1,000 an ounce. This despite it being the original leader of the six-metal Platinum Group Metals (PGMs) which includes palladium and four other metals that are chemically, physically, and anatomically similar — iridium, osmium, rhodium and ruthenium.

The disparity between platinum and palladium is even more astonishing if their basic functions are taken into consideration. Both are essentially auto-catalysts and emission purifiers; only that platinum is used in diesel engines, while palladium works best for gasoline-powered cars.

Platinum May Have Been Pricier Once But It’s Too Far Behind Now

The Volkswagen (OTC:VWAPY) diesel emissions cheating scandal of 2015 had severely impaired the reputation and output of diesel cars along with prices of platinum, which have never really reached their full potential since. A ramp-up since in electric vehicles has also weighed on diesel cars.

Since December 2008, palladium has come into its own, rising from under $190 in futures trade to settle at just below $1,200 by December 2018.

This year, as palladium crossed $1,300 territory to set record highs almost every month, if not week, due to critically short supplies coming out of Russia and South Africa, talk resurfaced about the potential of cheaper platinum substituting palladium.

But automakers argued that entire engine and emissions processes might have to be retooled for such purposes, incurring time and expenditure that wouldn’t be beneficial compared to palladium’s relatively small cost component in a car.

So, What’s Behind This Crazy Palladium Rally?

As reported over the past week, the momentum behind palladium is due to both panic and opportunistic buying by consumers and financial players reacting to flooding in South Africa that triggered power blackouts that in turn shut down mines producing palladium ore in that country.

As of Friday, South Africa’s state power utility Eskom Holdings SOC Ltd. was still implementing rolling blackouts, although at a lower level in the second largest palladium producing country.

For a commodity already feared to be in a supply squeeze, the South African crisis unleashed a new wave of hysteria that shut all logic out of pricing, said analysts.Daniel Briesemann, precious metals analyst at Commerzbank AG, captured the mood succinctly:

“It seems that nothing can slow palladium.”
“Even though we regard the steep price rise as exaggerated, there is no end in sight to the rally.”

So, How Much Higher Can It Go?

For what it’s worth, Investing.com’s Daily Technical Outlook has a near-term top-end resistance of $1,972 for spot palladium.

But that’s barely a target, considering where the price has gotten to.

Casting the ball further, Wallet Investor, an online forecasting service, projects a record high of $3,432.13 by mid-November 2024 — five years from now.

Individually, there have been outlandish forecasts of above $8080 by Gov Capital, which expects that target to met by mid-November 2024.

For now, $2,000 looks like a realistic target, and it might have been achieved by the time you read this — although there’s no certainty on whether palladium will close the year above or below that.

Latest comments

One more thing that occurred to me is that hydrogen cars need more PGM.  Toyota and honda started marketing their hydrogen cars and plan to ramp up soon.  Not sure if this will pick up or if it will just be a fad.  either way, it plays into the surge in PA price.
I need more diesel vehicles, cheaper to run, apparently…
Hybrid EV is the best -- you choice of switching to gasoline when necessary. But, of course, you need to be able to afford these things.
how to participate in this
Try this ETF : Aberdeen Standard Physical Palladium Shares ETF. Symbol: PALL
The question is can it still perform in 2020? Can expect the same results
Like everything else, this is a question that's difficult to answer at this point, as it depends much on the auto industry and production of gasoline driven cars continuing at the current rate or even higher. But based on the general optimism so far for 2020, the answer would be YES.
Win reward for most riged comodite yes.
I see where you are coming from, and if you read my copy closely, you will notice that I talk about opportunistic buying by financial players as well. So, you aren't exactly wrong in the way you feel.
Auto catalyst are essential or not for electrical vehicle ...
Palladium, this year’s hottest metal, is used mainly to cut pollution from gasoline engines. Yet anyone betting the rise of electric vehicles will curb demand anytime soon is likely to be disappointed, according to the metal’s top producer.Hybrid-electric cars, which also require precious metals to control pollution, represent a growing percentage of future demand, said Anton Berlin, head of analysis and market development at Norilsk Nickel PJSC. The Russian miner forecasts that combined palladium use in hybrid and plug-in hybrid -- or rechargeable -- vehicles next year will be nearly triple that of 2016.
That's from a Bloomberg story from December 2018, Dev.
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