LAWRIE WILLIAMS: Palladium hare and gold tortoise
As I write the price of palladium has retreated to the low $1,290s and still seems to be coming off, while gold has risen marginally into the $1,280s after falling below that level for a brief interlude. In short, gold seems to have found a bottom at around $1,279 and looks to be moving upwards again - but slowly - while the price of palladium, despite apparently strong fundamentals, is looking much more volatile.
We wrote here at the beginning of the month (See: Precious metals price predictions 2019) suggesting that although palladium’s fundamentals look strong and that its price may well exceed that of gold from time to time this year, that is unlikely to be a permanents situation and the yellow metal may well prove to be the better buy overall. A hare and tortoise situation a la Aesop!
This pattern may thus well be being demonstrated perhaps rather earlier than anticipated but we do see the longer term gold price this year as remaining distinctly positive, while that of palladium, being a much smaller market, as distinctly more volatile. The gold price may advance rather more steadily, while the palladium price may see spurts and setbacks which could take it above that of gold from time to time Palladium was comfortably the best performer in the precious metals complex in 2018, and may well prove to see a positive price pattern again this year, but we still expect gold to be the better performer overall (and silver could do better still given a rising gold price environment!).
Indeed we expect all the precious metals to perform positively in 2019, while we are less convinced about equities, bonds, industrial commodities and bitcoin. The world may well be entering a period of global recession and if this is the case then industry-related metals and equities will likely underperform, but with a number of potential geopolitical upheavals in prospect safe haven investments like gold could well do rather better.
Looking further ahead, palladium demand will undoubtedly slip as the internal combustion engine is gradually replaced by less polluting alternatives - electric vehicles of either the plug-in, or perhaps longer term the hydrogen fuel cell, varieties. This technology transfer may well take time but will likely accelerate as technology improves and recharging, and perhaps hydrogen refuelling, infrastructure becomes more efficient and widespread. We anticipate growth in such alternatives, with or without Tesla, will occur far faster than currently projected.
Gold has always been much more of a long term wealth protector than a rapid money-making investment and in this respect will always likely outperform upstarts such as palladium (and bitcoin) over a period of years. It has stood the tests of time whereas others have soared and, ultimately, failed and in this respect we see the rise of the palladium price as yet another commodity which will have its occasional time in the sun before collapsing and coming down to earth from whence it came, while gold will go on and on.