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The price of palladium continues to break records and is at $1,975 per troy ounce. As a result, the precious metal is currently more expensive than what gold has ever been. A structural shortage is driving up the price, while production in South Africa is partially halted due to power cuts. This country accounts for 40% of the world's palladium production. The two largest producers in the world, both based in the African country, have already had to cease production.
According to Ole Hansen, commodities analyst at Saxo Bank, these developments are supporting the price of the precious metal. In a statement to Bloomberg Earlier this week, he said he was already taking into account a further price increase. And that has indeed happened, because this week the palladium price has already risen by almost $100.
"The shortage in supply may increase further due to production problems in South Africa. This supports the palladium price. The price could still run into technical resistance at $1,900 per troy ounce, but could rise further after that."
The price of palladium has been on an upward trend for two years. The demand for the precious metal is now greater than the supply due to its use in catalytic converters of cars. Due to stricter environmental requirements, car manufacturers have to use more platinum and palladium. Both precious metals are incorporated into catalytic converters that reduce harmful exhaust emissions.
Due to the ongoing scarcity, any disruption in supply has the potential to shake up the market. Analysts at Citigroup therefore believe that the price of the precious metal will rise to $2,500 per troy ounce next year. They see little substitution from palladium to cheaper platinum in the car industry. Also, there is still not much extra palladium on the market through recycling, which means that the supply remains insufficient.
Palladium shortage persists (Source: Thomson Reuters, Metals Focus)
Platinum is also rising due to the increasing demand for catalytic converters, but because this precious metal is mainly used for diesel cars, the price increase in this market is less exuberant. This type of car is less popular due to the diesel scandal of a few years ago and new rules to ban old diesel cars in the city centres.
Nevertheless, platinum has also had an impressive price increase, as the platinum price in dollars has risen almost 35% since the beginning of this year. In addition to its industrial application in the automotive industry, this precious metal is also used for jewelry.
Do you also want to invest in platinum and palladium? Then take a look at our range of coins and bars:
