By Myra P. Saefong, MarketWatch
An impressive rally lifted prices for gold back to their highest levels since 2013, while palladium prices have notched records. Both metals look to climb even further, analysts say.
“The two metals have been in a race for the most precious for some time,” said R. Michael Jones, president and chief executive officer of Platinum Group Metals Ltd. /zigman2/quotes/202722078/composite PLG +0.86% “Palladium is still winning.”
Gold futures settled at $1,420.90 on Wednesday, the highest finish for a most-active contract since May 2013, according to FactSet data. Palladium futures , meanwhile, finished Wednesday at $1,565.80 an ounce, their highest Comex settlement on record.
Palladium trades about $145 an ounce above the price of gold. Before this year, it hadn’t been priced higher than gold in more than a decade.
Both metals have “crossed an important milestone in their quest as most precious,” says Jones, with gold crossing $1,400—a number gold bugs have been chanting for some time—and palladium is “making a significant comeback,” climbing back above $1,500 after being pounded back from around $1,600 in March to $1,300 in May.
Of course, the two metals aren’t the most expensive in the world. Rhodium, for one, traded Wednesday at $3,350 an ounce, according to data from specialty-chemicals company Johnson Matthey —more than double the price of palladium. Rhodium isn’t as commonly traded as gold and palladium.
The financial markets are “clearly repricing risk given the escalating number of worries, and gold is playing its traditional role as safe haven asset,” says John Ciampaglia, chief executive officer of Sprott Asset Management.
Gold futures scored a gain of more than $100 an ounce between late May and late June. “We are not at all surprised by the move higher as we believe the markets were overly optimistic about the strength of the global economy and the likelihood of resolving trade wars and geopolitical issues,” says Ciampaglia.
The metal had been largely range bound for a number of years and it has “decisively broken out,” he says. “We are in the very early stages of this break out as most generalist investors have not yet taken notice and repositioned their portfolios accordingly.”
Ciampaglia says most investors are underweight gold and only a “small shift in capital away from traditional asset classes into gold would fuel its rally for some time.”
If all the current market drivers for gold stay in place, he would not be surprised to see gold climb to $1,500.
Among the ways to gain exposure meanwhile, are through passive exchange-traded funds, as well as bullion funds and mining indexes, which are all affected by the gold price and “are a good options for investors,” says Ciampaglia.
Meanwhile, the outlook for palladium is also bright. Jones says there is no reason the metal won’t break its precious spot price high of $1,600 an ounce in the next few months.
“The market is tight and clean air is a growing chorus around the world. New standards for popular small gasoline cars in the rest of the world and Trumpian big trucks in the thriving USA economy, are using up palladium” in attempt for cleaner air.
Growth in the electric vehicle market, which would dull demand for palladium in emission-controlling catalytic converters in gasoline-powered vehicles, has been a concern for palladium, but it is becoming clear that real adoption rates for electric vehicles are “much slower than forecast,” says Jones.
“In percentage terms, there is growth in EVs, but off a low base—real cars are growing off a 100 million cars-a-year base—so the numbers are big, with even more palladium loaded in the tail pipe, assuming that “we want to drive and breathe.”