Palladium Demand Could Face Challenges

APMEX

1/23/2019 9:13:07 AM

Daily Gold & Silver Market Report – 1/23/2018

• Gold prices stable as investors turn away from riskier assets.
• The surge in demand for Palladium could face challenges.
• Evidence of a Gold/Bitcoin correlation begins to emerge.

Palladium prices have seen record growth over the last year, trading at a premium to Platinum for several months and recently pricing higher than Gold. An article on Quartz reports that two years ago, some researchers believed Palladium already hit its price peak. However, this did not turn out to be true. Approximately 80 percent of Palladium is used to reduce emissions from automobiles.

After it became public that Volkswagen executives falsified emission test results in the U.S., people abandoned hopes for clean-burning diesel engines. This sentiment pushed many European car buyers away from diesel automobiles, which typically use Platinum in their catalysts, toward gasoline cars with incorporate Palladium. This switch caused a supply shortage, driving prices up. However, Chinese car manufacturing is slowing. Also, ongoing supply shortages could lead some manufacturers to use Platinum in catalytic converters instead of Palladium. Finally, if more consumers embrace electric cars, which do not require any Precious Metals to reduce emissions, prices for both Platinum and Palladium could plummet.

Gold Stable with New Interest in Safe-Haven Assets

Gold prices were mostly stable during early trading Wednesday. This favorable position follows a big day for Gold bullion Tuesday, where the yellow metal saw its most significant gains in nearly two weeks. A CNBC report suggests the previous day’s gains were primarily driven by higher demand for safe-haven assets amid widespread economic uncertainty. Gold is known as a useful way to hedge against times of political and economic volatility.

Margaret Yang, a market analyst at CMC Markets, says in the article, “As the risk sentiment is biased towards the bearish side, based on all this data, Gold will have more room to go up and potentially challenge the resistance of $1,290-$1,295.” Much of the recent U.S. economic data has been disappointing, with December home sales reaching their lowest in three years. The ongoing partial government shutdown in the United States has also fueled interest in Gold bullion. 

Analyst Sees Signs of Gold-Bitcoin Correlation

Market watchers are continually looking for correlations between assets, and at least one analyst believes there may be one between Gold and Bitcoin. Jim Iuorio, managing director of TJM Institutional Services, points out Gold is known as an essential hedge against “overzealous monetary policy initiatives“ from central banks. He has also seen signs that Bitcoin may play a similar role. “As the dollar goes higher, and interest rates rise, the cost of holding non-interest-baring assets goes up and the price of both Gold and Bitcoin should go down. That’s exactly what we saw for the better part of the year that preceded November 14, 2018,” Iuroio observed in an article published on OpenMarkets.

As the end of the year brought news of a slowing rate of interest rate hikes in the U.S., alongside slowing dollar growth, Gold prices went up while Bitcoin moved down. Iuroio suggests, “The market still views Bitcoin as being in the infant stages of price discovery. The scars of the move from $20,000 to $6,000 are nowhere close to being healed.” He believes the inverse relationship between Gold and Bitcoin will continue until the cryptocurrency can prove to analysts that price stability is achievable.

At 10:10 a.m. (ET), the APMEX Gold and Silver spot prices were:

• Gold, $1,282.00 Down $4.60
• Silver, $15.37 Down $0.03
• Platinum, $795.20 Up $3.00
• Palladium, $1,351.00 Down $1.50

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