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Palladium could break $2,000 for first time

By Lawrence Gash

Demand continues to be high while supply is limited

The price of palladium has reached another record high in the past week and could break $2,000 an ounce for the first time.

In the late-afternoon GMT, palladium stands at $1,921.43, down 0.07 per cent on Wednesday’s close and more than $70 down on Monday’s all-time high of $1,998.40.

The laws of supply and demand explain palladium’s record-breaking rise throughout 2019.

Increased demand for the metal from the auto sector has coincided with ongoing production issues in nations with the largest deposits. This has caused a surge in what was once the cheapest of the major metals.

Now $500 an ounce more than gold and twice as dear as platinum, the autocatalytic metal has gained 60 per cent in value in the past year.

Its chief industrial use is in the production of catalytic converters for car engine exhausts. As pressure mounts across the world to decrease carbon emissions and reduce air pollution demand for the metal has increased.

Although Western nations have been at the vanguard of reducing emissions, emerging superpowers such as China have actually had the largest impact on the price of palladium.

The Chinese government has introduced regulations requiring new vehicles made in China to emit 30 per cent less harmful emissions than they currently do.

Furthermore, the palladium supply has come under pressure from sporadic yet regular power outages in South Africa, one of the largest producers in the world.

Some commentators have wondered whether the auto industry will replace palladium with a cheaper alternative such as platinum. However, market analysts seemingly do not see this change on the horizon. Analysts at Citi, for example, have outlined their view that palladium will break $2,500 by mid-2020.

FURTHER READING: Palladium price forecast for 2020 and beyond

FURTHER READING: New electric vehicle sales plunge in China for the fifth month in a row

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