Global Precious MMI: Palladium Hot Streak Continues

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Here’s What Happened

  • MetalMiner’s Global Precious MMI, tracking a basket of precious metals from across the globe, ticked back up a point to 87 for the November reading, a 1.2% increase. After a sizable dropoff last month, it looks as though this sub-index is crawling back toward the 2017 high of 89 reached this past September.
  • Palladium forged ahead, hitting a new high this year and landing a bit shy of the $1,000 per ounce mark. The platinum group metal’s U.S. bar price has jumped a whopping 44% since the beginning of the year.
  • Platinum rose marginally over the last month, staying just above the $900 per ounce level. It has receded from its most recent high of March 2017, when it landed above $1,000 per ounce. Notably, this is the second straight month in which palladium is priced at a premium to platinum.
  • After breaking and holding above the $1,300 per ounce threshold at the beginning of September for the first time since October 2016, the U.S. gold price is in its third straight month of retracement, ending up $9 per ounce lower than last month.

What’s Going On in the Background?

  • Why has palladium been trading at a premium to platinum? First, a bit of history.
  • “Palladium has traded at a discount to platinum because of platinum’s greater cost of extraction and its wider scope of applications,” MetalMiner’s editor at large Stuart Burns recently wrote. “But one application in which palladium does excel is catalytic converters for petrol engines. The diesel engine’s relative loss of favor over the last 12 to 18 months to the petrol engine has boosted demand for palladium, driving up the price to the point that it exceeded that of platinum for the first time in 16 years.”
  • Burns quotes analysts from UBS and SP Angel as saying they anticipate both palladium and platinum production to fall.

What Metal Buyers Should Look Out For

  • In the short term, keep an eye out on car sales. “With car sales growth featuring more in petrol-engine-dominated American and Chinese markets, and less in diesel markets like Europe, the demand bias has been for palladium, rather than platinum,” Burns writes. “But even within Europe there is gradual shift from diesel to petrol.” In fact, according to industry research group LMC, sales of diesel cars in western Europe fell from 45.1% of the market to 42.7% this year.
  • In the long term, the Rise of the Machines — electric vehicles, specifically — could really dent platinum and palladium demand.

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Key Price Movers and Shakers

  • The U.S. palladium bar price is the runaway winner for Biggest Mover this month, gaining 44% since January 2017 and 5.1% over last month to end up at $975 per ounce.
  • The U.S gold bullion price dropped $9 per ounce to end at $1,270.40 per ounce for November.
  • Silver prices were mixed, with the U.S. price showing a negligible rise, while prices in Japan and China dropped marginally.

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