Palladium Closing In On Gold?

Palladium Closing In On Gold

Recently I was asked by a colleague if I thought the price of Palladium would surpass the price of Gold. At that point it occurred to me that the way the price of Palladium has been reacting, that sure was a possibility.

I never in my wildest dreams ever thought that Palladium, the most boring metal of the four (as some traders refer to it), would in my lifetime be more expensive than Gold.

But today, the spot price of Palladium reached a new all-time high at $1,190 dollars, just about $32 dollars from catching up to the most popular metal.

The Palladium market continues to trade in a backwardation with the current EFP quoted at minus 22 minus 18. Meaning that the price of spot Palladium is now trading approximately 20 dollars over the most active futures month which is December.

Currently, the December Palladium open interest stands at 18,108 contracts and the CME warehouse holdings show only, between registered and eligible status 47,000 ounces.

So if you do the math, it’s 1,810,000 ounces open interest versus only 47,000 ounces available for delivery on first notice day in December.

On paper, this appears worse than it actually is, as the CME has in its tool box ways to cut this difference down dramatically before first notice day.

Nonetheless, it shows how much interest there is in the market when a metal is in short supply.

One month lease rates right now are quoted at 15 percent. So if you needed Palladium in a pinch, it could cost you a boat load of money to borrow the metal.

So where do we go from here? I can’t imagine that the price of Palladium will overtake the price of Gold and “stay there.” My guess is, if the price of Palladium does pass the price of Gold, it will be just for a moment and I expect a strong correction in the price of Palladium to occur at that time.

As we start the holiday week, the price of Gold is off a bit, the U.S. Dollar Index is virtually unchanged and the U.S. Ten-year Treasury Yield is at 3.08 percent. So, in other words, not much is expected today as we see calm markets across the board. But as we all have seen in the past, it would only take a tweet or some unexpected news to start a fire in any market these days.

Switching to a different kind of investment. Have you ever thought of helping a poor family that can’t afford a Thanksgiving meal? For approximately $70 dollars you can feed a family of six. There are organizations all over looking for help. Check with your religious organizations, or other civic groups your town or city to see how you can help. If money is an issue, consider volunteering at a soup kitchen in the morning and then I’ll guarantee that the Thanksgiving meal with your family later in the day will be the best ever.

Have a wonderful Monday.

Disclaimer: This editorial has been prepared by Walter Pehowich of Dillon Gage Metals for information and thought-provoking purposes only and does not purport to predict or forecast actual results. This editorial opinion is not to be construed as investment advice or as a recommendation regarding any particular security, commodity or course of action. Opinions expressed herein cannot be attributable to Dillon Gage. Reasonable people may disagree about the events discussed or opinions expressed herein. In the event any of the assumptions used herein do not come to fruition, results are likely to vary substantially. It is not a solicitation or advice to make any exchange in commodities, securities or other financial instruments. No part of this editorial may be reproduced in any manner, in whole or in part, without the prior written permission of Dillon Gage Metals. Dillon Gage Metals shall not have any liability for any damages of any kind whatsoever relating to this editorial. You should consult your advisers with respect to these areas. By posting this editorial, you acknowledge, understand and accept this disclaimer.