Palladium Price Outlook – March 2024

“Palladium prices are expected to remain range bound over the next few months. Palladium prices are expected to move mostly between $850 and $1,100. That said, palladium prices are the most volatile of the exchange traded precious metals at present and a sharp move in either direction, outside this range, is possible if not likely over the next three months. The sharp increase in prices on 6 March was an example of such a move. While all precious metals rose on that day, palladium’s move higher dwarfed all the others. That partly reflected the reality that palladium had ‘out performed’ the other metals on the downside earlier this year.

Palladium prices dropped to their lowest level since July 2017 during the second week of February. In fact, during that week, palladium prices dropped to a discount to platinum prices for the first time since April 2018.

Prices have recovered from those lows but are expected to face meaningful resistance around $1,100. It should be noted that while palladium prices are off sharply from the highs experienced in recent years, palladium prices around $1,000 per ounce are still very high by historic standards.

For palladium prices to rise back in a sustained fashion above the $1,000 level would require some sort of supply shock. In the absence of such a shock the pullback in mine supply from existing mines should provide some support to prices but is unlikely to drive palladium prices up sharply. Mine supply, especially from the older South African mines which have high costs, is likely to decline in the coming quarters. This should provide support to prices even though at least some of the lost output will be replaced by new palladium focused mines coming onstream later this decade that will negate some of the price benefit of reduced South African mine supply at the older mines this year.

There also has been a reduction in the force of a couple of headwinds to palladium prices, namely the aggressive move toward electric vehicles and the substitution of palladium with platinum in gasoline auto catalysts. While electrification of the auto industry is inevitable there are trends that are showing a slowing in the adoption of pure electric vehicles in favor of hybrid vehicles. This is a positive for all platinum group metals (PGMs) but particularly for palladium, which has the largest exposure to the passenger vehicle sector that has seen the greatest adoption of electric vehicles. The negative impact of palladium’s substitution with platinum also is almost entirely baked into the price of palladium and is unlikely to have a meaningful negative impact on palladium prices going forward.

While the reduction of these headwinds is good news for palladium prices, neither palladium price negative factor has gone away, with a move toward electrification inevitable and substitution ongoing.”