Palladium Prices Hit New Record, Rhodium Pushes To 5-Year High
(Kitco News)- Palladium and rhodium continue to be the two shining startsin the precious metals sector, both seeing surging momentum this week due to agrowing imbalance in their supply and demand fundamentals.
Palladium is closing out the week at a new record high;December palladium futures last traded at $1157.90 an ounce, up 5.5% from theprevious week. Meanwhile, rhodium is currently trading at its highest levelsince mid-2010, with its cash prices last trading $2,370 an ounce.
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Because of tight market conditions, analysts say that bothof these metals have room to move higher. Although analysts warn that rhodiumprices are extremely volatile as the metal only trades in opaqueover-the-counter markets.
Although considered precious metals, both palladium andrhodium have significant industrial uses with most of the demand coming fromthe auto sector. Both metals are critical components in catalytic converters,whichreduce harmful emissions in gasoline engines.
Peter Hug, global trading director for Kitco Metals saidthat optimism that the U.S. and China could reach a trade deal in the nearfuture is adding to the momentum in an already bullish environment.
“The supply fundamentals continue to favor both metals,especially if Chinese growth begins to pick-up,” he said. “We have beenstructurally bullish both the palladium and rhodium markets for the past 18months.”
Ryan McKay, commodity strategist at TD Securities said thatthey don’t see demand for palladium fading anytime soon as the market alsofaces growing supply deficits.
Commodity analysts at MKS PAMP said that they also like thefundamental outlook for palladium.
“Palladium is still in deep backwardation as it has been formany months now with physical premiums still very high,” they said in recentreport.
Despite the strong optimism in the marketplace, someanalysts are warning investors to not get too excited with the latest priceaction as there are growing concerns surrounding the health of the globaleconomy.
Mckay said that although there is a risk that palladiumprices fall in the near-term as sentiment on the global economy sours, he seesany selloff as a short-term move.
“Even if the global economy weakens, the palladium marketwill remain tight, supporting prices,” he said. “We would need to see a majorslowdown in global growth to impact prices.”
Hug also downplayed concerns over the global economy. “Thereis a danger of slowing global growth in 2019, which may impact car demand andbring the current palladium/rhodium deficits into a more balanced state, but inthe short-term pressure remains tilted towards higher prices,” he said.
Hug also warned that both markets are extremelyunpredictable.
“Investors should note that both markets areextremely thin and volatile price swings will remain the norm for theforeseeable future,” he said.
By Neils ChristensenFor Kitco News
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nchristensen@kitco.comwww.kitco.com Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication. |