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Palladium Tops Gold for the First Time in 16 Years

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Palladium, gold’s lesser known sister metal, extended its rally to new record highs on Wednesday in a buying frenzy that has been fueled by a major shift in the automotive industry.

Outshining Gold

For the first time in 16 years, the price of palladium has topped gold. The shiny, silvery metal used in primary manufacturing jumped $24.21, or 2%, to $1,250.22 an ounce on the New York Mercantile Exchange. The spot price peaked at $1,261.80, according to Bloomberg, and is now trading 51% higher than its August low.

Palladium’s technical indicators show strong momentum in the underlying price, though the relative strength index (RSI) suggests that the market has entered overbought territory.

At the same time, spot gold drifted slightly lower to $1,237.16 a troy ounce. The yellow metal has gained significant ground over the past four weeks, with prices rebounding 3%. However, gold’s returns have been less reliable with the seven-year bear market showing little signs of abating.

The crossover in price has been largely driven by improving fundamentals in the palladium market and a prolonged supply crunch that is making the cost of borrowing extremely expensive. As Bloomberg notes, “Holdings in exchange-traded products backed by palladium are at the smallest in almost a decade as investors pull the metal and offer the commodity for lease.”

The cost to borrow the metal for one month has reached a record high of 22% amid the buying frenzy.

Severe Shortfall

Palladium is a key commodity in gasoline-powered automobiles and is expected to see higher input in the future as markets shift away from diesel fuel. At the same time, the shift toward electric vehicles is also expected to catalyze the use of palladium in the foreseeable future. This has created a severe shortfall of available palladium, with the London-based Metals Focus Ltd. forecasting a deficit of 1.4 million ounces next year.

As Hacked reported last month, investors should keep a close eye on raw materials over the next two years as the market for electric cars heats up. The International Energy Agency (IEA) expects there to be 125 million electric vehicles on the road by 2030, up from just 3.1 million last year.

The supply crunch isn’t just limited to palladium, but includes primary metals such as copper, aluminum and nickel. Following years of underinvestment, the price of raw materials could skyrocket next year as demand grows and investors scramble for available supplies.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.7 stars on average, based on 771 rated postsChief Editor to Hacked.com and Contributor to CCN.com, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi




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Commodities

Gold Prices Get a Boost from Tame Inflation Data

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Gold prices headed higher on Wednesday after government data showed the smallest annual increase in consumer inflation in well over a year, giving the Federal Reserve more reason to hold off on raising interest rates.

Precious Metals Rise

Gold for April delivery climbed $2.50, or 0.2%, to $1,316.50 a troy ounce on the Comex division of the New York Mercantile Exchange. Bullion peaked at $1,321.70 on Wednesday, its highest in nearly two weeks.

Silver futures peaked at $15.80 a troy ounce, a new weekly high. The March contract was last seen trading at $15.78 a troy ounce, having gained 9 cents, or 0.6%.

Precious metals have seen their gains evaporate over the past two weeks, as an ascendant U.S. dollar pressured commodity prices. Gold and silver appear to be stabilizing this week despite the greenback’s continued strength. The U.S. dollar index (DXY), which measures the performance of the greenback against a basket of six rivals, rose 0.3% to 96.99.

Risk of Inflation Has Diminished

U.S. consumer prices flat-lined in January for a third month in a row, as volatile oil prices kept inflation in check. The consumer price index (CPI) remained unchanged in January, the Department of Labor reported Wednesday, confounding expectations for a 0.1% increase. In annualized terms, CPI rose just 1.6%, the weakest in over a year.

Stripping away food and energy costs, the so-called core consumer price index nudged up 0.2% in January and 2.2% annually, official data showed.

Following a volatile fourth quarter that saw stock markets plunge and global economic risks escalate, the Federal Reserve last month stressed ‘patience’ in normalizing monetary policy. The January policy statement signaled a dramatic shift in guidance from last year, when central bankers voted to raise interest rates four times. According to Fed Fund futures prices, the central bank is more likely to cut interest rates before raising them again.

The latest batch of CPI data echoed recent comments by Fed Chair Jerome Powell, who said the risks of higher inflation have diminished. This comes despite strong labor market fundamentals and continued economic growth.

Featured image courtesy of Shutterstock. Chart via Barchart.com.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.7 stars on average, based on 771 rated postsChief Editor to Hacked.com and Contributor to CCN.com, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi




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Commodities

Oil Prices Recover as Saudi Arabia Takes Drastic Measures to Rebalance Market

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Oil prices rebounded Tuesday after Saudi Arabia announced a new round of production cuts that were far larger than initially reported. The move comes amid growing doubts that the kingdom will be able to balance its budget this year.

Crude Rallies

The West Texas Intermediate (WTI) benchmark for U.S. crude futures topped $54.00 a barrel for the first time in six days. The contract was last seen trading at $53.42 a barrel, having gained $1.02, or 2%. International benchmark Brent crude futures advanced $1.18, or 1.9%, to $62.69 a barrel in London.

Crude prices declined sharply at the start of the week and have been directionless for the past month as traders assessed the impact of slowing global growth on energy demand. A lack of progress on the trade front between the United States and China has also added to the pressure. A new deal that keeps goods and services flowing is considered essential for the Chinese economy, which is a major consumer of energy.

Saudi Arabia Announces Deeper Output Cuts

Saudi Arabia announced Tuesday that It will reduce oil production to nearly 9.8 million barrels per day beginning in March, well below the production quota agreed to in December. Against current levels, that represents a drop of over half a million barrels per day.

The Organization of the Petroleum Exporting Countries (OPEC), an oil cartel made up mainly of Arab states, removed 797,000 barrels per day from the market last month, according to its latest report. The group had initially vowed to reduce output by 812,000 barrels per day during the month.

Saudi Arabia, the group’s de facto leader, is under growing pressure to boost prices after announcing a lofty budget for 2019. The blueprint seeks to boost spending by 7% in order to kick start a sluggish economy. According to the International Monetary Fund, oil must return above $80 a barrel for the kingdom to balance its budget.

Crude Oil: A New World Order Emerges

Brent futures peaked north of $86 a barrel in early October before reversing more than 42% over the next three months. A sluggish global economy and rising U.S. output have pressured the market and made it more difficult for OPEC to achieve its target.

Featured image courtesy of Shutterstock. Chart via Barchart.com.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.7 stars on average, based on 771 rated postsChief Editor to Hacked.com and Contributor to CCN.com, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi




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Commodities

Bullish Dollar Threatens Gold’s Resurgence

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Gold prices tumbled on Monday, as the dollar retained its bullishness amid ongoing trade tensions between the United States and China. At this stage, a comprehensive trade deal between the two superpowers appears highly unlikely before the March 1 deadline.

Gold Loses Its Shine

The April futures contract for gold reached a session low of $1,307.10 a troy ounce, the lowest since Jan. 25. The contract was last down $8.30, or 0.6%, at $1,310.30 a troy ounce on the Comex division of the New York Mercantile Exchange. Bullion is down 1.2% from its nine-month peak last set on Jan. 31.

Silver futures, which often trade in the same direction as gold, bottomed at $15.66 a troy ounce on Monday. The grey metal is teetering on three-week lows, having declined 10 cents, or 0.7%, to $15.71 a troy ounce.

The gold/silver ratio that is used to determine when to buy and sell precious metals has fallen to 83.20 from a peak near 87.00 in December. This basically states that 83.20 ounces of silver are needed to buy one ounce of gold at current prices.

Dollar Rebuffs Dovish Fed

The U.S. dollar continued to surge on Monday, as traders shrugged off the Federal Reserve’s dovish turn amid ongoing trade tensions with China. The dollar index (DXY), a broad-based measure of the greenback’s performance, climbed 0.3% to 96.93. That was the highest level in over a month. Since bottoming at 95.34 on Jan. 31, DXY ha gained 1.7%.

A stronger dollar tends to undercut greenback-denominated assets such as gold and silver, making them more expensive for holders of other currencies.

The greenback is expected to strengthen in the near term as traders look for safety nets amid global economic uncertainty. With the United States and China set to miss a self-imposed trade-deal deadline, the return of tariffs could place further downward pressure on the world’s second-largest economy.

Washington and Beijing have until Mar. 1 to reach a new trade deal before U.S. tariffs on Chinese goods are reinstated. Despite progress being made in January, both sides remain “miles and miles apart” on a new deal, according to Commerce Secretary Wilbur Ross.

The ongoing Brexit saga is also making the dollar more attractive relative to the British pound. The dollar-pound (GBP/USD) exchange rate fell 0.5% to on Monday to 1.2876, its lowest in three weeks. Related: GBP/USD Price Prediction: Cable Could be Hit Harder This Week

A weakening Eurozone economy is also weighing on the euro, the region’s common currency. Like the pound, the euro is trading near its lowest level in three weeks versus the dollar. The EUR/USD exchange rate was last down 0.2% at 1.1296.

Featured image courtesy of Shutterstock. Charts via Barchart.com.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.7 stars on average, based on 771 rated postsChief Editor to Hacked.com and Contributor to CCN.com, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi




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