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Deflating speculative bubble of catalyzer precious metals

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For more than three years, palladium has been more expensive than gold. At best gold briefly reached parity. For one ounce of Rhodium you paid, at its peak price, more than tenfold the price of gold at that moment. Both anomalies have since disappeared. Is the speculative bubble of catalyzer precious metals deflating?

I would like to start with a remark from the October 2022 article: Diverging price trends of ‘white’ precious metals

“Electrification of the car fleet may however imply the end of palladium shortage, let alone its need for catalyzers. Again, investors are not looking this far forward.”

Finally it seems to be dawning on speculators that the European Commission is serious about its intentions to ban the sale of new fossil fuel powered vehicles from 2035 onward within the EU.  Japan intends  adopting the same date to ban new fossil fuel powered vehicles. These will not be the first bans, but the first really influential bans on the total car manufacture market. Norway has decided to ban registration of new fossil fuel driven cars as early as 2025. Iceland will follow suit in 2030. The Chinese Island province Hainan also plans to ban new fossil fuel driven cars in 2030.

German car manufacturers kept open a loophole for the use of synthetic fuels. That should allow new hybrid vehicles to be sold fifteen more years.

Even nowadays, low emission areas in the historic center of many European cities are limiting the use of fossil fuel driven cars to recent models with catalyzer and additional dust filter. ‘Park and ride’ is not only easier, it gets compulsory for many car owners travelling to a European city.

The below table pictures the current (June 28, 2023) price of the precious metals, together with an all time high, preceded by its date. Also shown is an indication of how deep the price has dived as compared to the all time high. All time highs are spot prices on a closing basis. Moreover for Rhodium and Palladium (both have a high bid/ask spread) average of bid and ask is adopted. Only recently the spread was reduced for Palladium from $150/oz to $60/oz. (For gold it is only $1).

Are we at or near the bottom?

If history teaches us anything, I would argue: no. Rhodium has been less expensive than gold for several years. As the yellow metal peaked in 2011 near $1900/Oz, one could buy more than two ounces of Rhodium for that kind of money. For decades, Palladium used to be the cheaper PGM metal as compared to platinum. You can no longer buy three ounces of platinum for the price of one ounce of palladium, but the latter still sells at a premium of nearly 40% to platinum, which still only quotes about half the price of gold. For decades, platinum has been more expensive than gold.

Will those long standing historic ratios ever return? Hard to say… But the anomalies of the recent past seem having run their course.

For the graphs section and comments on the individual metals please read the complete article at the below link.


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