According to a Reuters article, analysts at UBS, a multi-national investment bank, believe that palladium will continue to lag behind other precious metals.
Palladium futures have dropped 12% this year, making them the worst performing precious metals in 2024.
Reuters quoted UBS analysts as saying that the underperformance of palladium was due to increased volatility and a weak demand outlook for metal.
Palladium futures at the New York Mercantile Exchange are currently $1,030.28 an ounce. This is up by 2.0% from their previous close.
The prices had increased sharply on the previous trading days. Investors bought metal at bargain prices, which helped to keep the price of the metal high.
A weaker dollar against a basket major currencies also helped boost sentiment in the market. The dollar’s weakness makes goods priced in greenbacks cheaper for buyers overseas.
G7 sanctions against Russian supplies are a subject of speculation
In October, the NYMEX palladium price had reached a record high of 10 months due to concerns about disruptions in Russian supplies.
The US called on the G7 to find ways to reduce Russia’s revenue by limiting palladium exports.
Around 40% of palladium is produced in Russia.
According to Reuters, UBS analysts stated that, with no sanctions in place yet, and a stronger US dollar, the palladium price had dropped below $1,000 an ounce.
UBS is sceptical about the G7’s ability to implement a ban that would result in shortages and higher prices.
They claim that Russian palladium is already being redirected towards Eastern markets and thus the immediate impact from such sanctions has been reduced.
Palladium: Neutral View
UBS maintained a neutral outlook on the metal despite the short-term supply risks.
The multinational bank stated that it has a neutral 12-month outlook for the palladium price.
According to Reuters, the bank said that due to palladium’s low trading volume and small market size only high-risk investors should consider investing.
Reuters cited UBS in its report:
We have a neutral outlook on palladium for the next twelve months. However, we believe that the outlook is negative for the long term, due to the oversupply of the metal.
Palladium: low demand on the long-term
UBS believes the demand for automobiles will decline sharply in the future.
The demand for battery-electric vehicles is expected to decline as the automotive industry moves away from internal combustion engine, which relies on autocatalysts based on palladium.
The bank stated that this structural decline will result in an oversupply of goods in the future.
UBS said, however, that the metal could remain in low demand in the short-term, as few consumers still choose hybrid vehicles. Palladium is still required for these vehicles.
According to Reuters, the bank is “constructive”, but has a negative outlook for palladium.
This post Palladium could continue to fall behind other precious metals in the future, according to UBS. It may be updated as new information becomes available.
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