Palladium has won the precious metals race in 2017 gaining roughly 50% this year which is its highest intraday level in over 16 years. While it did not hold strong above the $1K threshold yesterday, the outlook for the precious metal could support future gains.
The biggest demand driver, in an already short supplied market, was spurred by the auto industry. The precious metal is used in catalytic converters in effort to curb pollutants and change them into less harmful emissions.
Despite the push for ecofriendly transportation solutions, strong traditional gas-powered auto sales have been the culprit for the bullish palladium run. Before automakers ramp up production to meet the demands of a burgeoning electric car market led in particular by China, palladium will likely remain a hot commodity. However, buyer beware: platinum silver was traditionally used in catalytic converters, but automakers transitioned to palladium because it was far cheaper. Should the demand surge continue, one could easily see automakers return to silver to better their bottom line.
Utilizing the multi series charting capabilities in NinjaTrader, investors can plot the two sister precious metals and quickly identify their historical tandem relationship. The price action of each commodity seemingly mirrors each other since 2005, with palladium always underperforming platinum. However, one can spot the converging trend at the beginning of 2007 as palladium gained ground and eventually surpassed the price of its rival.
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