Guess there is no better way to call this sudden price spike of palladium, the catalytic converter metal by excellence.
Pd spiked well over $2400/Oz today, with the price about to settle to $2370, still up $137 or over 6% compared to yesterday Jan 16, which also was an all time closing high at Comex.
With the chronic supply deficit, the scramble for palladium is ongoing, which inevitably will result in increasing prices for catalytic converters in the first place and to cars fueled with gasoline as the ongoing price trend for palladium has been accelerating.
The above graph shows daily observations of the COMEX bid at market close (red line), the London (LME) AM fix (blue squares) and PM fix (violet diamonds). Until Jan 15, those observations stay close together and any deviation only is due to intra-day price fluctuations.
However since Jan 16 the COMEX bid-close starts lagging systematically the LME fix prices, which are real transaction prices.
Those who have monitored the bid and ask prices of precious metals (as published by KITCO), will have noticed that the bid-ask spread has been cranked up to $205/Oz when Pd was rising rapidly to its peak on Jan 17, only to be trimmed to a still lavish $150/Oz on Jan 28.
The palladium ascent was effectively broken, with the slide aggravated this week due to the Corona virus frenzy. All further conclusions are yours to draw.
Pd spiked well over $2400/Oz today, with the price about to settle to $2370, still up $137 or over 6% compared to yesterday Jan 16, which also was an all time closing high at Comex.
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| Palladium price on 15, 16 and 17 Jan 2020 |
Who said that diesel engines are a relic from the past and that electric vehicles won't become affordable in the foreseeable future?
Bubble alert
Investment advice for Palladium issued a bubble alert as the pace of the price rise entered into parabolic mode, hence is not sustainable. Throughout 2019, palladium and gold were competing in their rise until early September, when palladium convincingly took the lead. By now, an ounce of palladium buys close to 1.8 ounces of gold or equivalently 1 Oz of gold buys now only 0.56 Oz of Pd.
Looking back 5 or 10 years, palladium was much less expensive than gold, with an ounce of gold buying 1.5 Oz Pd in Jan 2015 and even 2.65 Oz Pd in Jan 2010.
Only recently palladium got more than twice as expensive as platinum which is used for catalytic converters for the now less popular diesel engines. Applications for Pt are more diverse as only about 40% of it is used for catalytic converters.
Issuing a bubble alert seems a bit premature in view of the dramatic rise of rhodium (Rh) since 2016. As gold peaked above $1360 back then, an ounce of gold bought almost 2 Oz of Rh, by now an ounce of gold buys less than 0.2 Oz of Rhodium. But it's a tiny market, with an annual Rh production less than 30 tonnes (less than 1% of the annual gold production). Rhodium is a by-product in platinum and palladium production.
Only recently palladium got more than twice as expensive as platinum which is used for catalytic converters for the now less popular diesel engines. Applications for Pt are more diverse as only about 40% of it is used for catalytic converters.
Issuing a bubble alert seems a bit premature in view of the dramatic rise of rhodium (Rh) since 2016. As gold peaked above $1360 back then, an ounce of gold bought almost 2 Oz of Rh, by now an ounce of gold buys less than 0.2 Oz of Rhodium. But it's a tiny market, with an annual Rh production less than 30 tonnes (less than 1% of the annual gold production). Rhodium is a by-product in platinum and palladium production.
Update 29 Jan : What to think of the COMEX bid ?
We commonly consider the COMEX bid price indicative for the market price of any commodity or precious metal. Think twice!
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| Palladium price from Dec 30 till Jan 29 - COMEX Bid and London (LME) AM and PM fix (as published on KITCO) |
However since Jan 16 the COMEX bid-close starts lagging systematically the LME fix prices, which are real transaction prices.
Those who have monitored the bid and ask prices of precious metals (as published by KITCO), will have noticed that the bid-ask spread has been cranked up to $205/Oz when Pd was rising rapidly to its peak on Jan 17, only to be trimmed to a still lavish $150/Oz on Jan 28.
The palladium ascent was effectively broken, with the slide aggravated this week due to the Corona virus frenzy. All further conclusions are yours to draw.
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