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The palladium boom continues to accelerate with the precious metal up 25% over the past two weeks to more than $2,500 per ounce.
Nowadays we are witnessing the rise of palladium. Since we are trying to be all “Greta Thunbergh-ish” meaning eco-friendly, we have realized that platinum and palladium are the metals to invest in.
The rise of the popularity of hybrid electric cars went on further with the palladium increasing by 25% over the past two weeks to more than $2,500 an ounce. Of course, this also tackled an interest in palladium’s twin – platinum.
At its current price, palladium has been almost doubled from the same time last year. This is made up mostly by the increased demand from carmakers, who use it in order to be eco-friendly.
$3,000 per Ounce?
As per Goldman Sachs Group Inc.’s Jeffrey Currie, palladium’s run could beat the psychological limit of $3,000 an ounce. However, analysts are saying that if this happens, it won’t last for long as the record levels would cut into demand.
“The upside potential is significant as the market is now in a demand-rationing phase. But gains wouldn’t be sustainable, as once demand was destroyed, prices would fall back again only to tee up for another spike, as we have seen the last year.”
The increase in the price of the palladium came first as a result of tighter emissions regulations that kicked in on January 1, 2020.
In December, new car registrations rose 21.7% in the European Union, and has reached the figure of $1.26 million. Palladium is mostly used for the making of catalytic converters that adjust exhaust emissions in cars.
Palladium has rocketed a 54% surge in 2019. The growth of a series of huge rises has left investors asking if the rise will continue. Currie actually says that this will be upside but “very volatile ride.”
“This process is likely to continue until auto producers finally switch to other precious metals, like platinum and rhodium. But this will likely only happen when the palladium shortages become severe enough to create problems in producing a car, which is still a ways away.”
At the time of writing, palladium was a bit down by 1.18% to $2,470 while platinum went down by 0.96% to $1,009.
Let’s also not forget the diesel emissions scandal in Europe has also had an impact. Drivers have been slowly but surely becoming eco-friendly and have been moving away from diesel cars, which mostly use platinum in their catalytic converters, and are now buying petrol-driven vehicles, which use palladium. The thing is that when we are talking about palladium, platinum and rhodium shortage – all three metals were in supply-deficit for several years.
Every year it becomes harder, deeper and more expensive to mine or, in the case of South Africa, a breakdown in the country’s electricity grid means deeper mines cannot be worked safely. We have already reported that demand for rhodium has surged recently citing a possible U.S.-China trade deal ahead this month that can trigger car and autocatalyst demand.
Andreas Daniel, a trader at refiner Heraeus Holding GmbH explained:
“The main driver by the beginning of January was physical demand from Asia, which might be also automotive related. Buying triggered more buying and in an unregulated market the effect was massive, with a price move which is only seen maybe every 10 years.”
Meanwhile, someone else is thinking that palladium is a chance to earn. The Russian billionaire Vladimir Potanin says that it would be a great idea to tokenize metals and commodities and says that there a huge appetite for metal-backed cryptocurrencies.
“Transactions in tokens are simpler and more convenient. People more and more tend to use decentralized networks and platforms that don’t have the main operator. We want to be active participants of this process,” explained he.