Prices of palladium have now reached more than USD2,500 per ounce, in a sustained rally potentially indicative of a late stage bull cycle, analysts at Man Group said on Tuesday.
Prices of palladium have now reached more than USD2,500 per ounce, in a sustained rally potentially indicative of a late stage bull cycle, analysts at Man Group said on Tuesday.
The four-year price surge in the precious metal has been partly fuelled by an increased demand among carmakers, due to its use in auto-catalysts that meet tougher emissions standards in the industry.
At the same time, there has been a sustained shortage of new supply in palladium, in turn pushing hedge funds to take a generally bullish stance on prices over the past 18 months.
In a note issued on Tuesday morning, analysts at Man Group – the publicly-listed London-based global hedge fund group which runs a range of quantitative, discretionary and fund of funds strategies – zeroed in on the ties between palladium price rallies and wider late stage cycles.
“This isn’t the first time palladium has been on a tear – similar moves happened during the late 1990s toward a then-record in 2001, driven again by a surge in demand for catalytic converters and amid concerns about slowing sales from key supplier Russia,” Man observed. Later, in 2008, closures of mines in South Africa again caused the metal prices to soar.
“While it is probably a stretch to think that palladium is dethroning copper or the yield curve as a leading indicator for the global cycle, the similarities with the 2000 end of cycle are notable to us: this is a marginal metal, with limited tradeable liquidity,” analysts explained.
“Illiquid assets with compelling narratives have a tendency to get caught up in speculative excess in the late stages of a bull market, particularly when the provision of liquidity by central banks is profound.”
