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Palladium posts all-time high that tops gold's record price

Kitco News

(Kitco News) - Palladium prices have once again hit a fresh all-time high, in the process exceeding gold’s record from nine years ago, as demand for the palladium in catalytic converters remains robust, traders and analysts said.

An additional impetus this week was continuing power issues in South Africa, some observers added.

As of 10:31 a.m. EST, spot palladium was up $26 to $1,922 an ounce and peaked at $1,935.30. Commerzbank analysts pointed out that this topped gold’s peak near $1,911 set back in 2011.

Platinum was up $2 to $938 an ounce and peaked at $944.40, its strongest level since Nov. 4.

TD Securities described the platinum group metals as “on fire as South African power woes add to supply concerns, particularly for palladium, which is in short supply.”

A desk trader downplayed the South African issue but emphasized the voracious demand for palladium in catalytic converters. The metal moved to a wide price premium over platinum in the two years, since palladium is used for catalytic converters in gasoline-powered cars, popular in the No. 1 and No. 2 car markets of China and the U.S.

“Palladium is trading strictly off of the fundamentals,” the trader said. “We have such strong demand…for catalytic converters.”

In particular, he explained, the consumption has increased in China and other countries due to more stringent environmental regulations. This has meant more loadings of palladium in each vehicle. In fact, some analysts said this has more than offset a decline in car sales during 2019.

“Palladium has been in a structural deficit for the last few years,” the desk trader said. “The increased demand due to higher emissions regulations in China, and a little bit in India, is just pushing that deficit deeper and deeper, which is driving the price...There is just a supply issue with people trying to get metal.”

Spot palladium has soared by 52% since the start of the year.

The trader said the South African power issues have been on traders’ radars for a while now. He pointed out that the load shedding has abated some from earlier in the week,
yet palladium has continued to rise anyway due to the strong demand, particularly from China.

“Even though we regard the steep price rise as exaggerated, there is no end in sight to the rally,” said Daniel Briesemann, metals analyst with Commerzbank. “Alongside palladium, platinum has also gained significantly for the second day in a row….This is probably related to the power outages in South Africa.”

Rolling power blackouts have occurred this week in South Africa, which along with Russia, is one of the world’s two leading producers of platinum group metals. This has impacted mining operations, which rely on electricity for operations that occur far below the ground, according to news reports.

Flooding after heavy rains exacerbated problems at public utility Eskom, according to news reports. The country’s president has also attributed some of the issues to suspected sabotage at power stations. Eskom provides more than 90% of South Africa’s power.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.