Gold is trading at the lowest level relative to palladium since 2004 as Bloomberg notes that prospects for a record shortage has lured investors to the metal used in pollution-control devices for cars amid concern that supply will be disrupted. As the chart below shows an oz of gold buys only 1.54 oz of palladium (less than a 3rd of the 5oz gold could buy in 2009) as supply problems (mining strikes and Russian sanctions) collide with demand expectations (the 'recovery' of the global car market). Despite GM's problems, record levels of channel-stuffed inventories [5], and a still stagnant consumer (showing no interest in big purchases), IHS expects a record level of auto sales this year at 85 million. Seems like this ratio is an interesting derivative play on the excessive exuberance in the world's car market expectations.
[6]
As Bloomberg notes,
Russia and South Africa are the world’s biggest producers of palladium.
A 17-week strike over pay at the South African mines of Anglo American Platinum Ltd., Impala Platinum Holdings Ltd. and Lonmin Plc, the largest producers, has squeezed supplies while western nations threaten Russia with sanctions for its actions in Ukraine. Johnson Matthey Plc predicts palladium’s shortage will expand to 1.61 million ounces in 2014 from 371,000 ounces last year. That would be the biggest shortfall since at least 1980, based on data on the company’s website.
"Beside the currently most important triggers for the price of palladium, namely the tense strike situation in South Africa as well as possible sanctions towards Russia in the Crimea crisis, global demand from the automobile industry should not be neglected,” Sonia Hellwig, senior manager for sales and marketing at Heraeus Metals Germany GmbH & Co. in Hanau, Germany, said by e-mail. “Furthermore the palladium ETFs continuously create positive impulses for the palladium price.”
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IHS Automotive predicts that global auto sales will climb to a record 85 million this year. Usage by automakers increased 3.6 percent to a record 6.91 million ounces in 2013, according to Johnson Matthey, which makes about one in three of the world’s catalytic converters.
Just ignore this...
[7]
And this...
