Chart of the week: palladium will lose its lustre

Palladium has gained 70% in a year. It now trades at about $1,530 per ounce. But any escalation in the US-China trade could spell an end to the rally.

Palladium spot price chart

Palladium, the silvery-white metal 30 times rarer than gold and used in catalytic converters, dentistry, electronics and jewellery, has gained 70% in a year. It now trades at about $1,530 per ounce. The rally has been driven by "three key pillars", writes Ross Strachan of Capital Economics.

Firstly, a "large structural market deficit" has been eroding stockpiles. "Second, tightening automotive emissions legislation in China and Europe" is increasing demand. These two factors have fuelled the third rising demand from investors, as shown by activity in the futures market. Yet "the scale and speed of the price rise has been overdone" and any escalation in the US-China trade could spell an end to the rally.

Viewpoint

Doug Noland, Credit Bubble Bulletin

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