Has The Palladium Bubble Burst?
After a virtually unstoppable three-year bull market, palladium is finally showing signs of slowing down. The precious metal is lining up its biggest weekly decline since 2016, plummeting 13.57% in response to rising concerns about a bursting bubble.
Palladium’s incredible performance can be attributed to its primary use as an auto catalyst to curb emissions. The recent push by EU regulators for more stringent controls on emissions, coupled with a surge in demand for environmentally friendly vehicles, sparked the all-out frenzy to buy up palladium by the truckload.
With palladium supply expected to be in a deficit for an eighth consecutive year, analysts are still confident that the palladium bull market has legs for more with supply-side concerns forecast to continue to drive prices higher. The recent slide is mainly to do with weaker Chinese auto manufacturing and a slew of bad macro data watering down the supply deficit effect.
This effect, however, has been deemed to be more short term in nature than the supply issues which are likely to come back with a bang over the medium term. So, what many are calling the bursting of the bubble may be a slightly premature call, but what may truly burst it is the shift to electric vehicles which will phase out the need for gas motors and catalytic converters by 2030-2050. Tick tock.