Often, when people think about the precious metals market, the first commodities that come to their mind are gold and silver. However, there are many other shiny elements in the periodic table that offer investors and active traders a variety of trading opportunities, and palladium is one of them.
Since the financial crisis of 2008, palladium has gained popularity as an investment option with a high intrinsic value. Extremely rare, and with multiple industrial applications, this precious metal is considered to be a safe haven for investors during times of economic and political uncertainty, market volatility and high inflation.
So far this year, palladium has experienced some significant gains, with the metal’s value skyrocketing to hit its all-time high of $1804 an ounce in October. Surging over 40 per cent from the beginning of 2019, the commodity has gained many followers. While some believe that 2020 will prove to be the most remarkable year for palladium, others are less bullish, urging clients not to rely too heavily on the shiny white metal
Do you also want to add some metallic sparkle to your portfolio, but are still concerned about palladium’s prospects? We have you covered. In this article, we review the metal’s historic price trends and discuss what the long-term palladium price forecast looks like.
Palladium price history: a long way to success
To be able to predict where palladium price might head to in the future, it is important to know how the commodity has performed in the past. Here is what palladium historicl chart from 1980 to 2019 looks like:
Throughout its history as a traded commodity, this precious metal has witnessed several ups and downs, reflecting a variety of political and economic events. It saw its record low price in June 1982 when it was valued at $47.46 an ounce. Over the next 13 years,the palladium price graph remained rather flat, with the metal trading at an average of $100 an ounce.
In December 1996, however, palladium gained an upside momentum driven by a surge in demand for catalytic converters, hitting $1,077 an ounce by the end of January 2001. But the commodity’s triumph did not last long. After some automakers had decided to switch to platinum, palladium quickly reversed its gainst and lost most of its value, falling back to $150 an ounce in April 2003.
After the Great Recession hit global markets, many more people chose to invest in precious metals, making these commodities one of the most popular markets of the past decade. This, in turn, helped palladium to surge again.
From December 2008, the value of palladium has been mainly on an upward path, with the exception of occasional, short-lived negative fluctuations. In 2016, the metal’s price rose some 45 per cent. In 2017, it gained 60 per cent. In 2018, it was up 15 per cent.
The latest palladium performance: the shining star of 2019
This year, palladium has vastly outperformed other precious metals. During 2019, the commodity has staged a spectacular rally, gaining almost 40 per cent since January, a figure more than double gold, platinum or silver. Physical demand and a global supply shortage seem to have been the key drivers of gains.
More than three-quarters of palladium ends up in hybrid vehicles and in the catalytic converters used in autos to reduce emissions. Today, many governments, especially China’s, are tightening regulations to crack down on pollution from vehicles, forcing automakers to increase the amount of the metal they use. However, supply cannot respond to growing demand, resulting in a global shortage and helping palladium prices to hit successive records.
Palladium prices first soared in March, after the US vehicle emissions controversy and a potential export ban in Russia drove demand for the commodity. Only a few months later, China, the biggest auto market, announced that all cars manufactured from 2020 will be required to contain around 30 per cent more palladium, boosting the metal’s value even higher.
In mid-October, palladium hit $1,784 per ounce. Then, a week later, it climbed to its historical high of $1,804. At the time of writing, the metal was traded at $1,726.19.
The latest palladium performance has investorsl excited about the future of the white metal. The question now is: will the metal continue its stratospheric rally next year? Let us see what experts have to say about future palladium prices.
Palladium price forecast for years ahead: what the future holds
Analysts are splin on the question of how high the palladium metal price will go in 2020.
As demand for the metal is currently buoyant, spurred by tighter environmental regulations for vehicles in China and a shift from diesel to gasoline cars in Europe, many predict palladium will have a bright future.
Speculative demand is likely also behind the frothy market, with investors choosing the commodity on supportive market fundamentals and the metal’s recent price trajectory.
Tai Wong, BMO’s head of base and precious metals derivatives trading, has said that palladium could reach $2,000 next year. However, investors need to be prepared for rather volatile trading patterns: “There’s just a persistent, continuing shortage of the metal...The sharp rally does suggest a correction at some stage but the outlook is robust,” Wong says. “ Palladium could even hit $2,000 next year; perhaps even higher, but the path is unlikely to be smooth.”
In her interview with Kitco News in October, Suki Cooper, a precious metals analyst at Standard Chartered Bank, stated: “Looking into 2020, from a fundamental point of view, palladium has the most constructive outlook.” Cooper also added the market deficit is one of the key drivers pushing palladium prices higher: “Palladium has been in deficit for the past seven years and we are forecasting a deficit in 2020 and 2021. The market is structurally undersupplied.”
When talking about the palladium price forecast, Mitsubishi analyst Jonathan Butler commented: “Over the next 12-18 months we are probably going to see $2,000 in range.”
According to the Reuters poll conducted in August, palladium’s median forecast was for an average of $1,467 this year and $1,500 in 2020. While these figures do not indicate significant growth in palladium’s value, they still represent the two highest annual averages on record.
Not all analysts have taken a bullish stance. Some expect prices to dip lower as automakers may reduce the amount of palladium they use in favour of platinum, which is now $800 an ounce cheaper.
Nicky Shiels, an analyst at Scotiabank, said: “Palladium remains in a structural bull market that can deftly capitalize on any spark… to reach new highs. But the later the business cycle gets, the more the downside opens up.”
Based on the information provided by Wallet Investor, an online forecasting service, the precious metal is prognosed to experience a long-term increase, with palladium trading at $3,432.13 by mid-November 2024. Therefore, if you decide to invest in the commodity today, your revenue is expected to be around +98.43 per cent in five years.
This is what their palladium price forecast for 2020 looks like:
Below are their price predictions for 2021:
Gov Capital offers the most optimistic palladium price outlook of all, expecting the metal to reach $8081.54 by the mid-November 2024.
Here is what their one-year prognosis looks like:
Palladium technical analysis from Tradingview.com shows real-time ratings for the commodity for one month. The results are as follows:
The bottom line
All in all, is palladium a safe investment? Just like with any other asset, investing in palladium gives no guarantee of financial success. However, according to the latest palladium price news, the metal is expected to shine its way through 2020 and bring some substantial gains once added to a diversified investment portfolio.
Trade Palladium Spot CFD
If you decide that palladium is the right investment for you and it has good potential for future price appreciation, the next step is to decide on how to invest in this lustrous metal. There are, in fact, a number of options. One of them is to invest in palladium through contracts for difference, or simply CFDs.
To learn more about palladium CFD trading, check out free online guide provided by Capital.com.
Do you want to become a part of the market and make your own bets on the future of palladium? Keep track of the latest palladium performance by checking out our comprehensive up-to-date chart.