Palladium rose significantly in 2016. Does that mean you should go ahead and invest in palladium? From a record low of almost $480 in February, there was a price rebound in the second half of the year with prices jumping up to $720 in September to finish in December at $678.
Although this year palladium is gaining almost 20% trading now at $786, investing in the metal should be done with caution due to the fact palladium is a volatile metal. In particular, the high in 2014 was over $900 and the low in 2009 was less than $200.
Last year after the US election results, palladium prices rallied supported by expectations that President Trump will actually boost economic growth and as a result increase automotive demand. Almost 75% of the world’s palladium production is used in auto-catalysts so sentiment was strong for palladium.
The platinum-palladium spread has narrowed substantially from $375 before the US election to $175 right now. This reflects clearly tighter underlying fundamentals for palladium.
HSBC’s forecast for for this year rose to $790 from $760, while Capital Economics sees palladium rising to $800 an ounce by the end of 2017, as growth in the Chinese vehicle market slows from 2016. TD industries sees palladium $740 in 2017 and $790 in 2018, while Societe General sees the average palladium price rising to $750 in 2017.