Palladium Eclipses Beaten-Down Platinum as Drivers Shun Diesel

  • Palladium surges 36% in 2017 on way to best year since 2010
  • Supplies are expected to tighten in next year in palladium

Palladium prices topped platinum for the first time since 2001, underscoring the diverging outlooks for the metals.

Supplies are expected to tighten in palladium, used mostly in pollution-control devices for gasoline-powered cars and trucks, while demand has slipped for platinum, which helps reduce smog from diesel vehicles. An ounce of platinum bought as little as .9901 ounces of palladium on Wednesday, the least since September 2001.

Spot palladium is up 36 percent this year, while platinum has climbed about 2 percent. The relative performance reflects car-sales trends: diesel is becoming less popular, particularly in western Europe, after some automakers admitted to cheating in emissions tests to gain regulatory approval.

Palladium rose for a second straight day on Wednesday after data showed China’s imports of the metal surged in August while platinum shipments fell. Traders have been bullish on the outlook for palladium. Citigroup Inc. has estimated the precious metal may see a production deficit of more than 1 million ounces in each of the next three years, from 770,000 ounces in 2017.

Holdings in exchange-traded funds backed by palladium are close to the highest since January, and the metal is the best performer among major precious and base metals this year. Earlier this month, platinum futures posted the longest losing streak in almost two years as hedge funds and other large speculators cut bullish bets by the most since March. 

Still, some analysts said palladium’s rise above platinum may be short-lived amid signs that recent moves in each metal may be excessive. Platinum’s 14-day relative-strength index fell below 30 this week, signaling to analysts who study charts that it’s oversold. CommerzBank AG says the metal is poised for a comeback as it trades close to the lowest level since July.

“The price difference will widen again,” Daniel Briesemann, an analyst at Commerzbank, said in a telephone interview. “Platinum is undervalued at the moment and will become more expensive again. There’s too much heat” in the palladium market.

Spot palladium rose 1.3 percent to $928.10 an ounce at 1:35 p.m. in New York, while spot platinum declined 0.3 percent to $921.90 an ounce.

The spread between the metals will “chop around for quite a bit,” said Peter Thomas, senior vice president at Zaner Group LLC. “Platinum will eventually come back above it at least by the end of the year.”

— With assistance by Eddie Van Der Walt

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