Explore Monex
Gold Market Analysis
December 4, 2018

Is palladium performing better than gold?


''Palladium Threatens Gold's Reign as Most Precious Metal''

''A rare silvery-white material is close to dethroning gold as the most valuable precious metal.

Palladium, which is used to filter emissions in gasoline car engines, has climbed to record highs recently. Prices are up more than 25% since the start of August and about 10% for the year, making the metal one of the market's best-performing assets of 2018.

Meanwhile, gold is down about 5% for the year, with investors preferring the safety of the dollar and U.S. Treasurys amid market volatility. A stronger dollar makes metals denominated in the currency more expensive for overseas buyers, while the prospect of higher interest rates makes gold less attractive than interest-bearing assets.

These dynamics can affect palladium as well. But it has been boosted by projections showing supply shortages and steady auto demand.

Palladium has climbed to about $1,180 a troy ounce; gold has fallen to $1,245. The difference between the two is the narrowest since 2002, according to Dow Jones Market Data. That palladium is close to eclipsing gold is the latest sign investors remain cautious about the outlook for bullion.

Most-active palladium futures were up 1.3% Tuesday. Gold added 0.6% as long-term Treasury yields fell, bucking a trend that has held for much for the year. Bond yields fall as prices rise.

''The casual investor in gold hasn't gotten anything for their money and they're still occupied elsewhere,'' said Tai Wong, head of metals trading at BMO Capital Markets.

Platinum, palladium's close relative, overtook gold earlier this decade but has since slumped to about $805. Analysts are wary about falling demand for platinum in diesel engines.

Palladium got another boost over the weekend with the U.S. and China signaling progress on ending their months-long trade dispute. Some analysts think a deal could help stabilize demand from the auto sector, and many expect supply to decrease from producers like Russia and South Africa.

''There is such a shortage of the material that the industrial users can't really get a hold of it,'' Mr. Wong said.

Hedge funds and other speculative investors have boosted net bets on higher palladium prices for four consecutive weeks through Nov. 27, pushing them to their highest level since March, Commodity Futures Trading Commission data show.

Speculators have increased bearish wagers on gold, meanwhile: Hedge funds pushed net bearish bets to a record in October, according to figures going back to 2006.

Of course, plenty of investors have counted gold out over the years, only to be proved wrong. Some analysts remain optimistic bullion can rebound after signals last week that the Federal Reserve might not be as aggressive with interest-rate increases moving forward.

With long-term Treasury yields falling amid worries about a slowing U.S. economy, gold has risen in four of the last five sessions. Some analysts are waiting to see if bullion can sustain a rally above $1,250, a level that gold hasn't been able to eclipse steadily since the summer.

The small palladium market is also prone to outsize swings, so some traders are bracing for a sharp decline if trade setbacks or higher supply shift the outlook.

Given palladium's recent climb, ''you have to be cautious'' Mr. Wong said''

*This information is solely an excerpt of a third-party publication and is incomplete. Please subscribe to the referenced publication for the full article. This is not an offer to buy or sell precious metals. Investors should obtain advice based on their own individual circumstances and understand the risk before making any investment decision.

See What Investors are Saying About Monex

Thank You!
Want your kit sooner?
Faster delivery is available by phone.
Get Your Free Report

A Better Future
with Precious Metals

  • All form fields are required

  • Privacy Policy
  • This field is for validation purposes and should be left unchanged.
Download Your Report