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Palladium Futures Hit Record $2,300 As Supply Deficit Worsens

January 17, 2020 at 20:19 by Andrew Moran

Palladium futures hit an all-time high of $2,300 at the end of the trading week before paring their gains. Spot palladium prices topped $2,500 an ounce, and analysts are expecting even further acceleration as the long-term supply deficit ostensibly worsens. After recording its best weekly performance in nearly 20 years, can palladium extend its four-year rally?

March palladium futures surged $55.40, or 2.54%, to $2,233.20 per ounce at 18:29 GMT on Friday on the Comex division of the New York Mercantile Exchange. Palladium is poised for a weekly gain of just under 8%, marking its best weekly performance since 2001. Not even a month into 2020, prices have already rallied 17%.

The $64,000 question is: What is driving palladium’s meteoric ascent? The fundamentals. The automotive industry has a huge demand for the metal, which is used for catalytic converters to control exhaust emissions. Amid consumer demands and legislative mandates, the industry is attempting to improve emission standards, and the markets with the biggest need for palladium are China, India, and the US.

For the last decade, palladium supplies have been in a deficit, and there is no relief in sight. South Africa, one of the biggest producers of palladium, has been suffering from a poor electricity system, which is impacting output. So, if there is an inventory of the metal anywhere, consumers immediately ship it to China. Put simply, as one London trader told Reuters, “There’s no metal.”

It is estimated that there will be a shortfall of 700,000 ounces in 2020 and 2021. Will this mean palladium posts another record year? The sentiment is split: some analysts think prices will go higher and others think there will be a correction and palladium will average $2,250 for the rest of the year.

As a result, there have been reports that automakers are thinking of switching to platinum. The metal has also been soaring, but it is more than half the cost of palladium: $1,000 an ounce.

Prior to this rally that has been going on since January 2016, prices had never surpassed $1,100.

In other metal markets, February gold futures tacked on $10.40, or 0.67%, to $1,560.90 per ounce. March silver futures picked up $0.135, or 0.76%, to $18.075 an ounce. February copper futures were flat at $2.85 a pound. February platinum futures rose $27.50, or 2.75%, to $1,208.70 per ounce.

If you have any questions and comments on the commodities today, use the form below to reply.

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