This White-Hot Metal is High and Going Higher

Have you been watching palladium lately? This metal is driving toward higher prices. But you know what? A combination of forces is going to put the pedal to the metal. If you think prices are high now, just you wait!

So what’s going on with palladium? Well, it’s high and going higher, as you can see from this weekly chart …

Image credit: StockCharts.com

You can see that palladium has rocketed higher since August. It’s not only outperforming the other metals; it’s even leaving the S&P 500 and the broad market in the dust.

This was caused by a number of forces, including …

  • A strong car market globally. Everyone wants to drive like Americans. Palladium’s primary use is in catalytic converters of gasoline-powered cars.
  • The collapse of platinum demand for catalytic converters. Platinum is primarily used for catalytic converters on diesel vehicles. And it turns out “clean diesel was a lie.”
  • A good old-fashioned supply/demand squeeze. It’s been going on for years. Last year, the supply/demand deficit eased, but this year, it looks to get particularly acute.

So why more of the same this year? A couple of reasons, and I have charts for both.

Investors STILL don’t believe in the palladium rally. Here’s a chart showing the price of palladium against physical holdings of the metal in ETFS …

You can see that, even as palladium prices heated up last year (the blue line), holdings in physical ETFs went down. Recently, those holdings dropped to 712,418 troy ounces.

That’s near a decade low.

This is a solution that is going to turn into a worsening problem for palladium users. Because ETF selling is one of the only places where palladium users (makers of catalytic converters in cars) could bridge the gap between supply and demand in the metal.

According to market watchers at Johnson Matthey Plc, the gap between supply and demand could rise to 1 million troy ounces this year. Does that sound bad? Other experts put the gap as high as 1.2 million ounces.

So, all in all, palladium’s bull run should continue this year.

Most of the palladium miners are not attractive. I wouldn’t touch them with someone else’s money, though that may change. Right now, you could buy one of the physical palladium ETFs. In the U.S., that’s the Aberdeen Standard Physical Palladium Shares ETF (PALL).

In any case, if you’re looking for a metal bull market, look at palladium. It’s revving its engine, and is on the road to higher prices.

All the best,

Sean

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