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Chart of the Day: Palladium (XPDUSD)

Palladium (XPDUSD) closed at a new record high, extending its run of form and closing higher for the 12th consecutive day. The 8% rally on Friday was its biggest daily gain since 2008.

XPDUSD daily chart

Demand for palladium continues to outstrip its supply, and the precious metal has closed higher every day this year. Last week’s moves were exponential.

The most common use of palladium is for catalytic converters, which convert the noxious gasses from car exhaust into substances less harmful. Russia and South Africa account for the majority of global supply.

Prices don’t go up forever, and as we can see the move has been extreme, with increasing calls that the move has gone too far, too fast. There have been suggestions for a pullback, perhaps as carmakers move in the long run to platinum (XPTUSD), a substitute, trading below half palladium’s value. Using platinum as a substitute though requires technological innovation and as long as 18 months before a switch could occur. So the underlying supply shortage won’t go away any time soon.

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