Palladium up 4% on geopolitical tensions, but platinum's move to 3-month high is attracting all the attention
According to analysts, platinum group metals are seeing a perfect storm as rising geopolitical uncertainty between the U.S. and Russia over Ukraine looks to threaten the market supply. Analysts note that palladium, already in deficit, would be the most impacted if Russia restricted the precious metal. Russia represents about 40% of the palladium market.
"Any disruptions in palladium market will only send prices higher," said Bark Melek, head of commodity strategy at TD Securities.
March palladium futures last traded at $2,363.50 an ounce, up 4% on the day.
While palladium is leading the precious metals market, its platinum's move that is attracting a lot of attention. Prices have pushed to a three-month high, breaking above a significant long-term trend line.
April platinum last traded at $1,092.90 an ounce, up 2.75% on the day. Some analysts are watching the November highs around $1,100 as a significant resistance point that could signal further upside momentum if it is broken.
|Palladium sees volatile action, up 1% as Russia/U.S. tensions continue to rise|
Daniel Briesemann, precious metals analyst at Commerzbank, noted that the ally in platinum comes as Europe continues to see weak vehicle sales numbers, which does not bode well for platinum demand. Platinum is a critical metal used to reduce harmful emissions from diesel engines, and the biggest diesel market is Europe.
Quoting data from the European Automobile Manufacturers' Association (ACEA), Brieseman said that new car registration numbers saw an annual drop of 6% in January.
"The ACEA is blaming this on the continuing chip shortage. It is cautiously optimistic about this year; however, last week it predicted that new car registrations would increase by 7.9% to 10.5 million," he said. "Nonetheless, this would still leave new car registrations nearly 20% below their 2019 pre-crisis level."
Melek said that, unlike palladium, platinum is still well supplied; however, he added that the bullish momentum in gold could be prompting investors to look for better value in the sector.
"I think we are seeing technical traders taking over the platinum market and they want to see just how high they can take prices," he said.
Nicky Shiels, Head of Metals Strategy at MKS PAMP SA, said that the move in platinum is the precious metal catching up with the rest of the market.
"Platinum had been grossly underperforming (its discount to Gold had widened to $840, and had widened to $1,340 vs. palladium, both recent lows)," she said in a note Wednesday.
She added that the precious metal could continue to shine as it moves back in line with the rest of the market.
"Overall, if these 'commodity supercycle' calls continues… under-owned & underpriced inflationary/monetary assets like platinum, will simply attract the macro/generalist inflows," she said. "Fundamentals (market surpluses and the ongoing chip shortages) and weak seasonals provide near-term headwinds, but could be no match if investors really reengage."