Palladium’s Explosive Surge Paves The Way For Silver And Gold

palladium

Take a look at the chart below and note the 414% surge in palladium prices.

So, what’s behind this massive move? It’s likely that you didn’t hear about it in the news. There was no headline risk or geopolitical event stirring market sentiment enough to cause such a buying spree.

No, this type of price explosion is a “classic” supply shortage.

To gain a better perspective, let’s take a look at how this price surge compares with the three major US indexes–the Dow Jones Industrial Average, S&P 500, and the Nasdaq Composite–during the same period.

Anyone following the economic conditions underlying the palladium market would have had a two-year window of opportunity to outperform the broader market by far.

From a price of $493 in mid-2016 to a high of around $2,543 last January, this surge reflects the fact that there wasn’t enough palladium to satisfy industrial demand, the largest of which came from automobile manufacturers.

As for this year, research firm Refinitiv identifies a massive undersupply–the palladium market is experiencing a severe deficit, short of approximately 883,000 ounces.

Naturally, and considering palladium’s near-parabolic price spike, many traders have begun selling to take profits or selling short to position themselves for a major price plunge.

But betting on the downside might not be the wisest thing to do if you look at the fundamentals–after all, palladium is still in short supply and high demand.

Bank of America analysts see price pushing up further, possibly to around $3,500 per ounce. It’s at that price level where BofA see’s a possible end for palladium’s bull run (but again, it also depends on the supply/demand conditions).

What Palladium’s Run Tells Us About Silver and Gold

If you’re thinking of investing in palladium, chances are that you missed the boat by a wide margin, and that you’ll be entering the tail end of its price surge.

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