In a drastic change of events, the price of palladium could soon rise above gold. In just over six weeks, palladium has climbed over 30%. Hence, for the first time in 16 years, palladium might be worth more than gold.
As you can see on the spot pricing chart, Gold and Palladium are running a close race. Gold is at $1,242.30. The price of palladium is at $1,240.60.
Catalytic converters, made for more environmentally friendly gasoline-powered vehicles, use palladium. The future price of palladium, PAZ8, +0.89%, has gone up from Mid-August. These numbers indicate it has risen from $837.20 an ounce to a whopping $1,072.80 an ounce since Friday. The industrial metal traded $250.40 above $822.40 futures price of platinum. Additionally, it was within $123.40 of gold.
Record Highs in Palladium Demand
We are seeing some interesting trends that are causing palladium prices to soar.
First, gold prices have been weak this year. Additionally, gold doesn’t have the same industrial uses as palladium. Finally, it is also more susceptible to the fluctuations of the U.S. dollar.
Secondly, the demand for diesel engines has fallen significantly over the past few years. Diesel engines use silver. Part of this trend could be because of the Volkswagon scam. Volkswagon admitted to skewing emissions tests on some diesel-powered vehicles in various places, including the U.S.
Thirdly, car demand remains stable. In the U.S., large SUVs stay in high demand. In Asia, smaller gas engines are in demand. Want for more cars has grown the ever-rising demand for palladium. The global desire for palladium increases yet global supplies tighten.
Low Supply of Palladium
Although the demands for palladium have increased, the supply has not been able to keep up with the demand. Last year (2017) 801,000 ounces were not able to be met. Experts forecast another shortfall this year of about 239,000 ounces.
South Africa and Russia mainly supply palladium. 40% of the supply is from South Africa but could quickly change. Palladium is a by-product of South African mining, but this mining is rapidly declining. Costs and low labor productivity are part of the decline.
Another issue is the potential of economic sanctions in Russia, where 44% of palladium is mined–causing a threat to the supply of palladium that comes from there. China could (and most likely will) purchase up large quantities of the platinum-group metals to secure their supplies. They will attempt to do this before any additional taxes impede their ability to buy at a cost-effective price.
Hence, a decline in supply is leading to various changes in prices of platinum compared to gold.
Lasting Effect for Investors
With the price of palladium switching roles with platinum after 16 years–a long-lasting effect could take place. Investors will likely change their purchasing decisions towards palladium. The gold and palladium ratio is about as narrow as it has been in a long time. Usually, gold is priced at least 2 to 3 times higher than palladium. Currently, it is only a little over 1.
The possibility for palladium to go higher than gold is possible. It will happen if supply stays low, demand for automobiles and electronics increases, and tighter emission legislation takes hold. In the U.S. and China—we will undoubtedly see it happen.
One thing is for sure. Experts predict palladium to climb to at least $1,400 by next year. Everything is already in place for this to happen.
Now is an exciting and smart time to get into purchasing palladium for investors.
Palladium–the Industrial Metal
What exactly is Palladium? It is a scarce and beautiful white precious metal. It has a low melting point and a low density–making it ideal for industrial purposes. 50% of its supply is currently being used to make catalytic converters in the automobile industry. Catalytic converters help to reduce carbon monoxide emissions. Jewelry, electronics, groundwater treatment, dentistry, and chemical application also use palladium. The gorgeous white color of palladium holds for life.
It is indeed an attractive investment because of its various application, limited supply, and increasing demand. It also holds a high value-to-density ratio.
How Palladium Prices are Determined
Like most precious metals, supply and demand truly determine the value and price of palladium. Although there are countless factors in the equation of deciding price–currents events, industrial need, buying power, and market speculation all play a role. Since palladium is considered an industrial metal, it experiences the many effects of market changes according to the automobile and electronic industries.
Investors should stay current with the palladium market and tune in to fluctuations to ensure financial success. Bullion Exchanges provides real-time spot pricing for buyers. We want to ensure you are getting the best price every day. We guarantee the authenticity of our products and are here for any questions you may have.
Don’t wait– look to purchase your palladium products today!