The Strategist

Palladium prices going up as environmental movement is rising

11/26/2019 - 07:56

Global palladium prices returned above the level of $ 1.8 thousand per troy ounce. The growth is supported by investors' expectations regarding conclusion of the first part of the US and China trade deal, as well as increased demand for metal from the automotive industry.

Noya Fields via flickr
Noya Fields via flickr
After a three-week break, palladium prices once again climbed above $ 1.8 thousand per troy ounce. According to Reuters, on Monday, November 25, the price of the precious metal rose 2.1% to $ 1814 per ounce. The price nearly reached the historical maximum ($ 1824.5 per ounce), recorded on October 30,. The remaining precious metals cannot boast of such an increase in value. So, the price of gold fell by 0.3% to $ 1,457 an ounce, silver fell by 0.5% to $ 16.95 an ounce; platinum went up, but only by 0.6%, to $ 896 an ounce.

Palladium prices are recovering amid expectations that the US and China will sign the first phase of the trade agreement by the end of the year. Last Friday, US President Donald Trump announced that negotiations on a trade agreement with China are progressing well. Over the weekend, US Presidential National Security Advisor Robert O'Brien said the conclusion of the first part of such an agreement with China is still possible by the end of the year. Under such conditions, the expectations of international investors regarding the prospects for the global economy are improving. This has a positive effect on risk appetite among investors.

The palladium prices keep going up despite a drop in global car sales. According to Fitch Ratings, in 2019, car sales will drop by 3.1 million units, to 77.5 million units, which will be the worst drop since 2008. The main negative impact on the world market will be provided by China, where sales of cars in January-October fell by 11% compared to the same period in 2018. In general, by the end of 2019, sales in China are expected to drop by 2.1 million units, to 21.6 million cars. Car markets in the United States and Western Europe will fall by about 2% this year - to 16.9 million and 14 million, respectively, Fitch predicts.

Despite the decline in car sales, industry demand for palladium is growing. This is facilitated by a wide and fast implementation of China 6 environmental standard in China, as well as toughening the requirements for laboratory and road tests in Europe under the Euro 6d-TEMP standard. Tighter environmental standards resulted in an increase in the share of palladium in gasoline engines.