Palladium price forecast: What’s up with this metal?
The markets have kept palladium in the news. But what is the palladium price forecast?
Palladium is the ultra-rare metal which is used in jewellery, mobile phones, dentistry and cars. It’s been attracting attention lately, so let’s look at what it does and see if we can make a palladium price forecast.
What is palladium?
The silver-coloured precious metal is used in ceramic capacitors found in mobile phones and laptops, as well as dental fillings and white gold jewellery, which is a gold-palladium alloy.
In all, 80% of palladium produced is used in the manufacture of catalytic converters for petrol cars, where it catalyses reactions that clean pollutants from the engine’s exhaust.
While palladium used to take second place to platinum, which is used in diesel car exhaust systems, the 2016 Volkswagen emissions scandal took its toll on the metal’s adversary.
The demand for diesel cars plummeted and Volkswagen was fined $18bn. With buyers turning to petrol cars again, palladium found itself much in demand and saw it outperforming platinum for the first time, gaining 45% in 2016 and a further 60% in 2017.
What’s more, tighter regulations in Europe have clamped down on the most polluting vehicles. In 2018, Brussels took the drastic step of outlawing old diesel cars and trucks. This had a dramatic effect on new diesel car sales in the EU, which dropped from 50% to just under a third, between 2016 and 2018.
Palladium’s demand-fuelled rally has been further powered by the growth in hybrid electric vehicles, whose exhaust systems can often require more of the precious metal than conventional engines.
Palladium is extracted commercially as a by-product of platinum, nickel, copper and zinc refining with its main producers being Russia and South Africa. Russia’s major nickel producer Norilsk accounts for 40% of the global output of palladium.
Palladium's market status
As we will see, palladium has had a good year, even if the price has dipped recently. Speaking to Bloomberg earlier this year, Tai Wong, BMO Capital Markets’ head of metals derivatives, said: “It’s a confluence of factors that’s driving palladium. Fundamentally, there’s going to be a material deficit this year and automakers need to restock.”
Although motor manufacturers are moving towards electric vehicles, palladium is used in hybrid vehicles, which are enjoying growing demand while companies get their EVs ready for mass consumption.
The recent gains in the palladium market are also the result of broader economic peaks and troughs. After losing over 49% in 2008 during the recession, the palladium price recovered in-line with the global economy.
Now, let’s take a look at the metal’s recent price history. While past performance is no indicator of future results, it can be useful to examine what’s gone on as context for a palladium price prediction.
Palladium price history
On 28 September 2020, an ounce of palladium was worth $2,258.50. This was already a comparatively high price for the metal, but things were on an upward trajectory, albeit one with some peaks and troughs. For instance, on 9 October, the palladium price was $2,454, but just two days later it was back down to $2,335.10. In reality, the price was in a state of hovering somewhere around the $2,400 mark, which is where it roughly stayed until the end of October when it dropped down to $2,210.30. However, the drop was short lived and on 6 November palladium was worth $2,495.20. Again, there was a trough following the peak and it was back below the $2,400 mark on 11 November. In fact, the price stayed between $2,300 and $2,400 for the rest of the year, although it did close the year at $2,448.50.
As 2021’s markets started, the palladium price stood at $2,385.90 as of 4 January. This was a temporary blip, though, as the very next day the price went up more than 4% to reach $2,488.10. This was as good as it got at the time and the palladium market entered a somewhat bearish stretch, with the price trending downward until it fell to $2,226.40 on 2 February. After this, there was some recovery, and the price re-emerged to hover in the $2,300 to $2,400 range again for most of the next month.
In fact, it was a drop that heralded the rise that shocked the world, or at least the part of the world that cared about the price of palladium. On 9 March, it was worth $2,288.80, but on 18 March it was worth $2,658.30, a rise of more than 16% over the course of nine days. It now seemed that somewhere in the $2,600 mark was the new normal for palladium. The bullishness was not over yet, and there was a monthly high of $2,947.30 on 27 April. There were some people tweaking their palladium price forecast at the possibility the metal would hit $3,000 per ounce. While that didn’t happen, 4 May’s price of $2,981.60 represented an all-time high. Although the price did go down a little, it was still pretty high. In fact, the price remained in the upper half of the $2,500s until 17 August when it dropped to $2,493.80.
That’s when the decline started and the price dropped below $2,000 for the first time in a long time on 14 September when it was worth $1,979. The downward spiral continued, and in the afternoon of 27 September it was worth $1,947.
With that out of the way, let’s take a look at different palladium price forecast types.
Palladium price forecast
First of all, LongForecast is rather bearish, at least in the short term. The site’s palladium forecast for 2021 sees the price going down to close the year at $1,694. In September 2022, it will rally slightly to stand at $1,929, and a year later it will be $2,270. In September 2024, the forecast is for palladium to be worth $2,937 and 12 months after that it will get to $3,334.
Meanwhile, CoinPriceForecast is more optimistic. It says palladium should get to $2,514 at the end of 2021 and $2,872 a year from then. When 2023 finishes, the site says the metal will be worth $3,588, rising to $3,949 a year later and $4,398 a year from that. In December 2026, palladium will, according to the prediction, be worth $5,186. A year from that, it will be worth $5,961 and in December 2028 it will be worth $6,325. When the 2020s end, palladium is predicted to be $7,035 and at the end of 2030 it should be worth $7,961. In 10 years time the palladium price will be, if the forecast is correct, $8,381, going up to $9,065 a year on and closing 2033 at $9,458.
Finally, WalletInvestor says palladium will be worth $2,581.44 in a year and $4,818.68 in five years' time.
It might. The forecasts are optimistic, at least in the longer term. We do need to point out, though, that forecasts are often wrong, and you should do your own research before investing.
Potentially. It depends on whether or not you believe the price can turn around soon and, if so, how quick the return to bullish ways will take. Just remember that prices can go down as well as up.
It might be. Remember to study the market yourself and never invest more money than you can afford to lose.