An impressive rally took gold prices to their highest levels since 2013, while palladium prices hit record highs. Both metals are looking to climb even further, analysts say.
“Both metals have been in a race for the most valuable for some time,” said R. Michael Jones, president and CEO of Platinum Group Metals Ltd. PLG,
“Palladium always wins.”
US Gold Futures:GCQ19
settled at $1,420.90 on Wednesday, the highest result for the most active contract since May 2013, according to FactSet data. US Palladium Futures:PAU19,
meanwhile, ended Wednesday at $1,565.80 an ounce, their highest Comex settlement on record.
Palladium is trading around $145 an ounce above the price of gold. Before this year, its price had not been higher than that of gold for more than a decade.
Both metals have “taken a big step in their quest to be the most valuable,” Jones says, with gold crossing $1,400 – a number of gold bugs have been chanting for some time – and palladium “doing a significant comeback,” rising above $1,500 after falling from around $1,600 in March to $1,300 in May.
Of course, the two metals are not the most expensive in the world. Rhodium, for its part, was trading Wednesday at $3,350 an ounce, according to data from specialty chemicals company Johnson Matthey— more than double the price of palladium. Rhodium is not as commonly traded as gold and palladium.
Read:Advantages and disadvantages of investing in rhodium, a precious metal twice as valuable as gold
Financial markets are “clearly re-pricing risk given the growing number of worries, and gold is playing its traditional role as a safe-haven asset,” says John Ciampaglia, managing director of Sprott Asset Management.
Gold futures saw a gain of more than $100 an ounce between late May and late June. “We are not at all surprised by the upside move as we believe markets were overly optimistic about the strength of the global economy and the likelihood of resolving trade wars and geopolitical issues,” Ciampaglia said.
Read:Why the price of gold hit its highest level since 2013
Metal had been a big part of the lineup for a number of years and it “definitely broke out,” he says. “We are in the very early stages of this breakout as most generalist investors have yet to take notice and reposition their portfolios accordingly.”
Ciampaglia says most investors are underweight gold and that only “a small shift of capital from traditional asset classes into gold would fuel its rally for a while.”
If all the current gold market drivers remain in place, he wouldn’t be surprised to see gold surge to $1,500.
Meanwhile, among the ways to gain exposure are passive exchange-traded funds, as well as bullion funds and mining indices, all of which are affected by the price of gold and “are a good option for investors,” explains Ciampaglia.
Meanwhile, the outlook for palladium is also bright. Jones says there’s no reason the metal shouldn’t break its precious spot price of $1,600 an ounce over the next few months.
“The market is tight, and clean air is a growing chorus around the world. New standards for small gas-powered cars popular in the rest of the world and big Trumpian trucks in the booming US economy are using palladium in an attempt to get cleaner air.
The growth of the electric vehicle market, which would reduce the demand for palladium in gasoline-powered emission catalytic converters, has been a concern for palladium, but it is becoming clear that the actual adoption rates for electric vehicles are “much higher. slower than expected. says Jones.
“In percentage terms there is growth in electric vehicles, but on a low base – real cars are growing on a base of 100 million cars a year – so the numbers are big, with even more palladium loaded into the tailpipe, assuming “we want to drive and breathe.”
