NEW YORK – Platinum's discount to fellow precious metal palladium reached its highest level since 2001 on Thursday, as the latter soared on heightened vehicle demand and an ongoing supply deficit.
Palladium hit a high of $1 022.70 on Thursday, just off a 16-year high from last week, while platinum hit a low of $887.50/oz, putting it on track for its biggest weekly loss in nine months.
The platinum discount widened to around $120 on Thursday, the steepest since April 2001, according to Reuters data going back to 1985.
"Palladium is powering on with the demand for more vehicles," said George Gero, MD of RBC Wealth Management in New York.
"There's more need for palladium, which cannot be reclaimed as easily or as often from junked automobiles as platinum."
Both platinum and palladium are used in catalytic converters in car exhaust systems. However, palladium is in higher demand in the United States and the Caribbean, particularly lately, as consumers replace vehicles damaged in recent storms, Gero said.
US automakers said vehicle sales rose 1.3% for November versus the year prior, while China, the world's largest auto market, saw a 2% rise in auto sales in October compared with the year prior.
Platinum is more heavily used in diesel vehicles that have fallen out of favour since the Volkswagen emissions-rigging scandal of 2015.
Palladium has traded at a discount to platinum for most of the last 16 years. Their fortunes have reversed, however, and prices crossed in September for the first time since 2001. On November 28, palladium touched $1 028.70/oz, its highest since February 2001.
"Platinum is trading on the correlation to gold and has gone through a couple of key technical levels," said Ryan McKay, commodity strategist at TD Securities in Toronto.
Gold broke through its recent trading range this week after slipping below its 200-day moving average. Since mid-October, prices had stayed between $1 265/oz and $1 300/oz as investors poured money into the stock market, which hit a series of record highs.
TD Securities, Citi Research and ABN Amro predict a comeback for platinum in 2018 on industrial demand and as automakers may substitute palladium for platinum in gasoline engines.