"It currently commands a premium of about $ 120 compared to gold, and that is also about 1.8 times the price of platinum, so it looks very high. The problem is that it has never been so high here, we are in a new territory and have a kind of feeling, currently attracting an important element of investment, which could have diverted the price of the balance. " said James Steel, a precious metals analyst at HSBC. "This market has been strong for many quarters and it works with a production deficit."
Palladium futures are up 22% since the beginning of the year, double the movement of copper and four times that of gold. Gold futures were trading at around $ 1,350 an ounce on Wednesday.
Citigroup analysts said this week that they were bullish for metals, but especially for copper, palladium, iron ore and zinc. They expect an increase of 8 to 15% over the next three to six months.
"We believe that the" macro "and" micro "factors combine to outperform these markets, while more general commodities could increase, but to a lesser extent, due to an expected improvement in climate. The main downside risks to our vision are that Trump levies increase new trade rates on China or a difficult Brexit occurs, "Citigroup analysts wrote.
Palladium is used in catalytic converters, which are part of automatic exhaust systems. Suki Cooper, an analyst at Standard Chartered, said global automakers are adhering to higher emissions standards, increasing the demand for exhaust gas control devices and, as a result, precious metals . In 2018, 8.7 million ounces of palladium on a 10 million ounce market were destined for the auto industry, she said.
"We expected to see a correction, a profit taking along the way," said Cooper. But as palladium producers can not increase their capacity for several years, the market will be tense and the price trend higher.
"We expect partial deficits for the next two years," she said. "Supply growth is limited, demand is still robust, even though we are seeing a slowdown in auto sales in China and the US It is environmental regulations that have had a big impact. more important on aggregate demand. "
There is currently no real and simple way to replace palladium, of which 75% is extracted in Russia and South Africa. According to Cooper, although car sales are slowing, emissions laws are becoming more stringent around the world. Motorists have also abandoned diesel for gas cars, which require more palladium. Electric vehicles do not use palladium, unlike hybrids, analysts said.
Steel said its platinum could replace palladium. "It would take several years, the two metals are in the same group, … but the two are acting differently at different temperatures," he said.
According to Cooper, average palladium loads have risen worldwide, even as auto sales have plummeted, often signaling a lower demand for palladium. "From the point of view of the car industry, they have to respect the standards, they need first of all that their cars are compliant and then they are looking for cost savings." she says.
Analysts say the market was helped by the fact that the ETFs that held the metal were liquidated by investors who have made significant profits over the years. "Part of the tension was eased in 2018 due to the totality of ETF's outflows and the release of stocks by some producers," she said. One of these ETFs is the PALL Aberdeen Physical Physical Palladium ETF.
But ETFs hold only 700,000 ounces after releasing more than 2 million ounces in recent years, she said. "You can see more ETF buyouts," she added.