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Palladium scramble

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Guess there is no better way to call this sudden price spike of Palladium, the catalytic converter metal by excellence.

Pd spiked well over $2400/Oz today, with the price about to settle to $2370, still up $137 or over 6% compared to yesterday Jan 16, which also was an all time closing high at Comex.

Palladium price on 15, 16 and 17 Jan 2020

With the chronic supply deficit, the scramble for Palladium is ongoing, which inevitably will result in increasing prices for catalytic converters in the first place and to cars fueled with gasoline as the ongoing price trend for Palladium accelerates.

Who said that diesel engines are a relic from the past and that electric vehicles won’t become affordable in the foreseeable future?

Bubble alert

Investment advice for Palladium issued a bubble alert as the pace of the price rise entered into parabolic mode, hence is not sustainable. Throughout 2019, palladium and gold were competing in their rise until early September, when palladium convincingly took the lead. By now, an ounce of palladium buys close to 1.8 ounces of gold or equivalently 1 Oz of gold now only buys 0.56 Oz of Pd.

Looking back 5 or 10 years, palladium was much less expensive than gold, with an ounce of gold buying 1.5 Oz Pd in Jan 2015 and even 2.65 Oz Pd in Jan 2010.

Only recently palladium got more than twice as expensive as platinum which is used for catalytic converters for the now less popular diesel engines. Applications for Pt are more diverse as only about 40% of it is used for catalytic converters.

However in the perspective of the rhodium rally, issuing a bubble alert for palladium still seems a bit premature: near the peak of the 2016 gold recovery, rhodium plunged to barely more than half the price of gold. By now an ounce of rhodium is worth more than 5 Oz of gold. Rhodium is a byproduct of platinum and palladium mining, with an global annual mine production of only 30 tonnes (about 1% of the annual gold production).



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