Palladium’s deficit-driven ascent shows no sign yet of letting up, with the metal notching another record on Tuesday even as some analysts warn of the growing potential for a correction given the rapid sprint upward.
Spot palladium rose as much as 1 percent to $1,558.80 an ounce, an all-time high, and was at $1,542.68 at 7:45 a.m. in London. Prices are up 22 percent in 2019, and February will be the seventh monthly gain. That year-to-date gain tops the performances of all members in the Bloomberg Commodity Index.
The silvery-white metal used to control harmful emissions in gasoline-fueled cars has soared on expectations for persistent worldwide deficits, with the rally stretching palladium’s ratios with gold and platinum. Adding further momentum is the threat of a strike by a mining union in South Africa, a key producer along with Russia.
“Palladium has entered into bubble territory given its historical wide premiums to other metals, not least the near $700 premium over platinum,” Ole Hansen, head of commodity strategy at Saxo Bank A/S, said by email. “But as long we see no change in the outlook for tight supply or changing demand dynamics from consumers, the price could go higher.”
Commerzbank AG has also issued a warning, saying that the commodity “is showing more and more signs of being a bubble.” UBS Group AG strategist Joni Teves has said there’s scope for deep pullbacks even as market participants now talk about the potential for the metal’s price hitting $2,000.
Earnings to Come
Investors are due for updates on the outlook for the global market as leading producers report earnings this week. Russia’s MMC Norilsk Nickel PJSC is due to turn in figures later on Tuesday, while Impala Platinum Holdings Ltd. reports on Thursday. Shares in both miners have surged this year.
Anglo American Platinum Ltd., which last week declared its biggest dividend since 2008, said that it expects the three major platinum-group metals -- including rhodium -- to be in a combined deficit again in 2019, as demand from the automotive industry increases, even with little or no growth in car sales, due to expanding average vehicle size and tightening emissions rules.
More than 80 percent of palladium comes as a byproduct from nickel mining in Russia and platinum mining in South Africa, so supplies depend on the extraction level in other minerals. The viability of platinum as a substitute has also been downplayed -- research has shown that technological advances are needed before it can match the performance of palladium-based catalytic converters, according to Johnson Matthey Plc, which makes the devices.