An odd mixed bag in the precious metals’ markets today, with gold and palladium trading lower, and silver and platinum trading higher. This all with dollar weakness providing tailwind support for all metal prices.
The odd mix I am referring to is the price changes of palladium and platinum. As of 4:30 PM Eastern standard time platinum futures are up 2.44% (+$20.80), and palladium futures are trading down – 1.76%, ($24.60). While palladium futures have been on a wild upside surge recently, taking it to a new all-time record high above $1500 per troy ounce, platinum has been trading under pressure.
Because these two precious metals are both used in catalytic converters, they both continue to have pricing that reflects the strength or weakness of the automotive market. Currently the technology for catalytic converters requires the use of both metals, along with rhodium, cerium and a few other metals.
However, the price differential between platinum and palladium has expanded exponentially as palladium gained tremendous value and platinum pricing remained flat or under pressure. Platinum is the catalyst in a catalytic converter, and the use of palladium is still needed but for a different function, as an oxidation catalyst.
Platinum and rhodium are still required for the removal of hydrocarbons (HC), carbon monoxide (CO) and oxides of nitrogen (NOx) in the exhaust, which are converted to carbon dioxide (CO2), nitrogen gas (NOx) and water vapor (H2O). The assumption that platinum can replace the need for palladium in a catalytic converter is currently not true.
What is true is that both platinum and palladium are mined together from the same deposits. More so these deposits are only found in Russia and South Africa, and it is Russia who controls the supply chain of both sister metals.
What we are witnessing today is market sentiment pricing platinum as undervalued and palladium as overvalued. Whether this becomes a trend rather than as a brief event cannot be determined by the price action of a single day. Only time will tell if the platinum-palladium ratio will narrow as it did today.
Wishing you as always, good trading,