Against the backdrop of recent downward pressure on US dollar and US bond yields, international gold prices approached the $1800 mark on Wednesday, breaking a recent two-month high of $1797. However, despite the recent strong trend in gold, there is someone else who has risen the most in the precious metals sector. Among them, the performance of platinum group metal palladium is undoubtedly better.
Market data show that spot palladium prices rose more than 4% on Wednesday, setting a new record high of $2895, and breaking the $3000 mark seems just around the corner. As of press time, the spot price is $2857.
Palladium has risen more than 16 per cent so far this year, after the platinum group metal rose for five years in a row. Palladium's fundamentals are undoubtedly more solid than gold's recent boost from risk aversion and the dollar's decline, with expectations that supply shortages and a rebound in demand from carmakers will plunge the palladium market into severe supply shortages.
As the automotive industry enforces stricter emission standards, the price of palladium, which is mainly used in automotive catalytic converters, has soared in recent years. Supply disruptions at Russian mines operated by MMC Norilsk Nickel PJSC, the world's leading palladium and refined nickel producer, added to supply-side concerns in the first quarter, although the world's largest nickel producer has said it is recovering faster than planned.
UBS (UBS Group AG) expects a palladium supply shortfall of about 1 million ounces in 2021, the 10th consecutive year of annual shortages.
"A series of positive supply and demand factors are pushing up palladium prices," said Philip Klapwijk, managing director of Hong Kong-based consulting firm Precious Metals Insights Ltd. This will also further attract speculative capital. Palladium prices fluctuated in a range until the emergence of the 'catalyst' of supply disruptions in Russia in mid-March. "
Peter Thomas, senior vice president of Zaner Precious Metals, is optimistic about the future of palladium. Based on recent discussions with platinum and platinum producers, he believes palladium prices could climb to $3500 next year.
In addition, Bart Melek, head of commodities strategy at TD Securities, said, "We are seeing palladium-based catalytic converters widely used in automobiles and industries." He expects the market to be so tight that it will be difficult to obtain the metal. Melek said that while there might be a technical price correction, a significant downward adjustment was highly unlikely given Palladium's strong fundamentals.
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