Palladium is now trading at around $1,100 an ounce after large deficits, tight supplies and resurgent interest from speculative investors sent prices rocketing almost 40 percent from a mid-August low to an all-time peak of $1,150.50 on October 23. While it won't maintain those levels, palladium will average $1,025 in 2019 and $993 this year, its best two years on record, a poll of 29 analysts and traders conducted this month found.
"Rising gasoline car sales and tighter emissions limits point to even higher palladium autocatalyst offtake in the coming years," said Societe Generale analyst Robin Bhar. Added to that, Bhar said, palladium is set for an eighth successive supply shortfall in 2019 and stockpiles are falling.
Expectations have barely shifted from a similar poll three months ago, which foresaw averages of $1,016 in 2019 and $1,000 this year. Some analysts cautioned against being too bullish, noting speculators who have bet on higher prices could turn against the metal as quickly as they embraced it.
"Trade tensions remain the key downside risk for palladium," said Daniel Hynes and Soni Kumari at Australian bank ANZ in a written comment to Reuters. "Gasoline cars production growth is likely to slow down in China and the US, this should result in slower auto catalyst demand growth. That said, the market deficit should remain in place, protecting the downside," Hynes and Kumari said. The auto sector consumes around 80 percent of palladium.
Platinum is also used in autocatalysts, but it is used more in diesel vehicles, which have lost market share since the "dieselgate" emissions scandal of 2015. That shift away from diesel will help to push platinum prices to their lowest annual average since 2004 next year, according to the poll.
Respondents forecast an average platinum price of $875 an ounce in 2019, down from $882 this year, marking the seventh and eighth consecutive years of falling prices. Platinum is trading around $830 after hitting a 10-year low of $751.25 in August.
"Demand continues to face headwinds from the diesel emission scandal and mine supplies remain resilient, as a weak South African rand lowers the dollar-denominated production costs," said Julius Baer analyst Carsten Menke. Platinum prices moved below those of palladium for the first time since 2001 last year, having over the previous 25 years commanded an average premium of more than $450 an ounce.