The precious metals market has been through a lot of interesting movements in recent months. We’ve seen the rise, sputtering, and re-rise of the price of gold. Silver is different in magnitude, but not much different in volatility. It has been some recent roller coaster movements as well.
Perhaps the most surprising movement in the previous metals market so far in 2019 has been the rise of palladium. For the first time since 2002, palladium, the world’s “forgotten” previous metal, has surpassed gold in value. As of writing, palladium is worth an incredible $1,392 per troy ounce. By comparison, gold is worth (again, as of writing) $1,310 per ounce.
The rise in the price of palladium has been massive, as indicated by the circled area of the following figure.
Let’s take a closer look at what some might call the “palladium miracle of 2018/2019”.
The following graphic has the price of palladium from early 2017 through the first week of 2019. The massive rise in the price of palladium, from $849 to $1,392, on August 16, 2018.
What’s causing palladium to gain so much in value? The simple answer (and probably incomplete) is that the precious metal has received and continues to see increased demand from environmental concerns. Palladium is used more frequently in catalytic converters, which is used more as the globe potentially shifts from diesel to gasoline and hybrid vehicles.
Coinciding with the rising demand is relatively stable supply. Whether that will stay the case is a separate question.
How does palladium’s performance in 2019 compare with 2018 so far through the year? Well, 2019 is off to a hot start, as indicated in the following figure.
Through the first little over a month of time, palladium’s price is up about 8%, a healthy return compared to many other asset classes.
Compare that with how palladium started 2018, where the precious metal shed 4% in value before picking up steam in August 2018.
With this background in mind, let’s put the 2019 performance in perspective, through a comparison with the rest of the years in this decade.
Before looking, which year since 2010 would you guess was the best performing year for palladium?
Interestingly, the answer is 2012. Through the first 40 days of the year, palladium gained about 13% in 2012.
Which year comes in second? Fascinatingly, it’s not 2019. The answer is 2017, which saw the precious metal gain about 12% in value through the first 40 days of 2017.
In third place is 2019, up about 8% for the year so far.
Overall, 2019 has been kind to palladium so far. If the price continues to zoom along like it has since August 2018, we may end up calling 2019 the year of the palladium miracle. It is, of course, too early to make such a prediction.