Palladium. 123RF/alexlmx
Palladium. 123RF/alexlmx

Palladium broke the $1,400/oz barrier on Friday morning for the first time after JPMorgan Chase & Company said it is betting the metal is headed to nearly $1,600/oz.

Image: Iress

The price of palladium, which is mainly used in catalytic converters for petrol engine cars, has rocketed despite gloomy forecasts for car sales in the coming years.

Palladium at over $1,400/oz and platinum at under $800/oz reverses their prices from five years ago when car makers switched metals to save costs.

Although it might make sense for carmakers to switch again, Dow Jones reported that industry specialists say that is a lot easier said than done.

It would take carmakers two years to make the change, and they need to be convinced the palladium price will remain at least $500/oz more than platinum for years to come, Dow Jones reported.

Thursday morning’s 1.1% rise in palladium to $1,414.33/oz was probably thanks to a bullish note JPMorgan e-mailed to clients.

The bank said it bought palladium at $1,357.50/oz on Wednesday, and, after resistance was breached at $1,343/oz, it now sees the next upside target at $1,587/oz.

“Palladium has entered uncharted territory,” JPMorgan technical analyst Thomas Anthonj told Bloomberg.

Palladium’s status as a byproduct of mines in SA and Russia means output levels are not adjustable to meet short-term demand, despite the surging price, Bloomberg reported.

It is easy for local punters to bet on palladium — along with platinum, rhodium and gold — because all of these precious metals are available as exchange-traded funds (ETFs).

Absa’s NewGold Palladium, whose JSE code is NGPLD, closed at R189.01 on Thursday, giving it an annual gain of 42.13%.

Standard Bank offers JSE punters two ways to gamble on the palladium price. It has an ETF called AfricaPalladium, with code ETFPLD, which closed at R187.90 on Thursday, giving it an annual return of 41.19%.

Standard Bank also offers palladium as an exchange-traded note (ETN) with code SBAPD1. At Thursday’s closing price of R527.68, its annual return was 43.52% — placing it ahead of the competing ETFs.

Whereas the ETFs have to physically own what they represent, which in the case of palladium means bars of the metal guarded in a vault, the ETN synthetically tracks the price through rolling futures contracts, making it theoretically more efficient.