Palladium is the most valuable
precious metal in the world. An ounce of palladium sells for more than $1,500
compared to the $1,400 that an ounce of gold sells. The metal is different than
gold in a number of ways. For example, while most of the gold mined is used for
investment purposes, most of the palladium that is mined is used for industrial
purposes. Most of it is used as a catalytic converter to curb carbon emissions.
In recent years, the price of
palladium has been on a roller-coaster as the demand for the metal has risen.
This has led to an increased deficit, which has continued for the past eight
years. This demand has come from gasoline vehicle manufacturers who have
continued to buy the metal to meet the stricter emission standards. This demand
has increased as more automobile companies like Fiat Chrysler have been forced
to recall vehicles that did not meet the correct emission standards. Fiat was
forced to recall more than 862k gasoline cars, which led to a demand for 77k
ounces of palladium. This year, production is expected to trail consumption by
more than 540k ounces.
Most of the world’s palladium
comes from Russia and South Africa while most of the demand comes from the
leading automobile countries like Germany, Japan, and Mexico.
While the supply pressures will
continue, the auto sector is seeing major changes. After a decade of increased
automobile sales, the industry is slowing down around the world. In this
decade, the growth in auto sales was the longest since the Great Depression. This
growth happened as a result of low interest rates and the demand for more
sophisticated vehicles. This slowdown could also affect the US economy. This is
because the sector is the largest manufacturing sectors in the US. In 2019, the
sales are expected to drop by 2% this year to 16.9 million vehicles. They are
expected to slow to 16.3 million and 15.1 million in 2020 and 2021. Around the
world, the same slowdown has been slowing as shown below.
In the past few days, the price
of palladium has been in a holding pattern. As of this writing, the pair has
reached $1527, which is lower than the all-time high of $1616. On the annual
chart below, this price is slightly above the 21-day moving average. The RSI
has eased slightly while the stochastic indicator has been moving lower. The
price could decline as demand slows.
The post Why Slowing Auto Sector Could Lead to a Decline in Palladium Price appeared first on Forex.Info.