Gold gets leapfrogged as palladium rallies to record

Gold just got left behind by one of its sister metals. After a demandfuelled rally over four months that’s seen prices hit successive records, palladium topped gold.

Palladium, which hasn’t traded at a sustained premium to gold in 16 years, has gained as buyers scramble for supplies of the metal used in vehicle smog-control devices. Demand has risen as consumers turn toward gas-powered cars, which tend to use more palladium. The metal “should continue to benefit from strong fundamentals in 2019,” according to Bloomberg Intelligence.

While most metals have waned amid global trade concerns and a rising dollar, palladium rose to records four times in November amid expectations that output will continue to fall short of demand. Holdings in exchange-traded products backed by palladium are at the smallest in almost a decade as investors pull the metal and offer the commodity for lease.

“People are grasping for whatever ounces of material they can get” in the palladium market, Tai Wong, head of base and precious metals trading at BMO Capital Markets, said before Wednesday ’s levels were hit. “It’s very expensive to borrow, and that is perhaps the biggest factor driving the spot price higher.”

Palladium for immediate delivery climbed as much as 2.4 per cent to a peak of US$1,261.70 an ounce, and was at US$1,260.68 at 9:24 a.m. in New York, according to Bloomberg pricing. Spot gold was less than 0.1 per cent lower at US$1,238.16 an ounce.

The cost to borrow palladium for a month was at a record 22 per cent, more than seven times higher than the 10-year Treasury yield.

Palladium’s deficit is set to widen to about 1.4 million ounces in 2019, according to London-based Metals Focus Ltd.

Supply is likely to remain broadly stable in 2019, while there will be growing demand from the auto sector, according to Junlu Liang, a senior analyst at the consultancy.