Palladium is the most valuable precious metal in the world. An ounce of palladium sells for more than $1,500 compared to the $1,400 that an ounce of gold sells. The metal is different than gold in a number of ways. For example, while most of the gold mined is used for investment purposes, most of the palladium that is mined is used for industrial purposes. Most of it is used as a catalytic converter to curb carbon emissions.
In recent years, the price of palladium has been on a roller-coaster as the demand for the metal has risen. This has led to an increased deficit, which has continued for the past eight years. This demand has come from gasoline vehicle manufacturers who have continued to buy the metal to meet the stricter emission standards. This demand has increased as more automobile companies like Fiat Chrysler have been forced to recall vehicles that did not meet the correct emission standards. Fiat was forced to recall more than 862k gasoline cars, which led to a demand for 77k ounces of palladium. This year, production is expected to trail consumption by more than 540k ounces.
Most of the world’s palladium comes from Russia and South Africa while most of the demand comes from the leading automobile countries like Germany, Japan, and Mexico.
While the supply pressures will continue, the auto sector is seeing major changes. After a decade of increased automobile sales, the industry is slowing down around the world. In this decade, the growth in auto sales was the longest since the Great Depression. This growth happened as a result of low interest rates and the demand for more sophisticated vehicles. This slowdown could also affect the US economy. This is because the sector is the largest manufacturing sectors in the US. In 2019, the sales are expected to drop by 2% this year to 16.9 million vehicles. They are expected to slow to 16.3 million and 15.1 million in 2020 and 2021. Around the world, the same slowdown has been slowing as shown below.
In the past few days, the price of palladium has been in a holding pattern. As of this writing, the pair has reached $1527, which is lower than the all-time high of $1616. On the annual chart below, this price is slightly above the 21-day moving average. The RSI has eased slightly while the stochastic indicator has been moving lower. The price could decline as demand slows.