Palladium prices soar in relation to platinum

Platinum’s discount to fellow precious metal palladium has reached its highest level since 2001, as the latter soared on heightened vehicle demand and an ongoing supply deficit.

Palladium hit a high of $1,022.70 early today, just off a 16-year high from last week, while platinum hit a low of $887.50 per ounce, putting it on track for its biggest weekly loss in nine months.

The platinum discount widened to around $120, the steepest since April 2001, according to Reuters data going back to 1985.

The prices moved back a little by late morning to $1,004.42 for Palladium and $893.30 for platinum.

Vehicle demand

“Palladium is powering on with the demand for more vehicles,” said George Gero, managing director of RBC Wealth Management in New York told Reuters.

There’s more need for palladium, which cannot be reclaimed as easily or as often from junked automobiles as platinum.”

Both platinum and palladium are used in catalytic converters in car exhaust systems.

However, palladium is in higher demand in the US and the Caribbean, particularly lately, as consumers replace vehicles damaged in recent storms, Gero said.

US automakers said vehicle sales rose 1.3% for November versus the year prior, while China, the world’s largest auto market, saw a 2% rise in auto sales in October compared with the year prior.

Platinum is more heavily used in diesel vehicles that have fallen out of favour since the Volkswagen AG emissions-rigging scandal of 2015. 

Reversal of fortunes

Palladium has traded at a discount to platinum for most of the last 16 years. Their fortunes have reversed, however, and prices crossed in September for the first time since 2001.

On Nov. 28, palladium touched $1,028.70 per ounce, its highest since February 2001.

“Platinum is trading on the correlation to gold and has gone through a couple of key technical levels,” said Ryan McKay, commodity strategist at TD Securities in Toronto.

Gold broke through its recent trading range this week after slipping below its 200-day moving average.

Since mid-October, prices had stayed between $1,265 and $1,300 an ounce as investors poured money into the stock market, which hit a series of record highs.

TD Securities, Citi Research and ABN Amro predict a comeback for platinum in 2018 on industrial demand and as automakers may substitute palladium for platinum in petrol engines.