Palladium has been struggling in 2024, with UBS analysts predicting that it will continue to underperform compared to other precious metals.
The decline in palladium futures this year, making it the worst-performing precious metal, is attributed to increased market volatility and a weak demand outlook.
The current price of palladium futures on the New York Mercantile Exchange is USD 1,030.28 per ounce, reflecting a recent increase driven by bargain buying and a weaker dollar.
The recent increase in palladium prices can be attributed to speculation about potential G7 sanctions against Russian supplies. However, UBS analysts caution that the price of palladium has since dipped below $1,000 due to the lack of implemented sanctions and a stronger dollar.
UBS maintains a neutral outlook on palladium for the next twelve months, despite short-term risks to supply. They express skepticism about the effectiveness of G7 sanctions and note that Russian palladium has already been redirected to eastern markets.
Looking ahead, UBS projects a significant decline in demand for palladium, particularly from the automotive sector, as the shift to battery-powered electric vehicles reduces the need for palladium-based catalysts. This could result in a substantial oversupply of palladium in the future.
The current market sentiment surrounding palladium is cautious, with UBS highlighting that only risk-averse investors are likely to consider entering this market. The low trading volumes and limited market size further complicate the investment landscape for palladium.
The implications for palladium demand from the evolving automotive industry are significant, as the shift towards electric vehicles could reshape the demand landscape for palladium.
In summary, the underlying fundamentals suggest a challenging road ahead for palladium, with volatility, shifting demand patterns, and the potential for oversupply contributing to a cautious outlook for the metal in the coming months and years.