According to FT and Bloomberg, there are tremendous Palladium shortage deficit as China needs to complies with a new emission rule for auto catalyst. Palladium / Platinum ratio does not matter even this is more important than gold/silver and gold/palladium ratio. Russia is not supplying any more physical bars, how credible do you view these to pop up Palladium? Every day, London price surge and short term lease rate rises to over 35%. Thank you very much.
pantheo
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@dshen1, HI, I don't know much about palladium market. I think Pal is for gasoline engines while Plat for diesel ones. Or vice versa? Maybe after the VW scandal and the rest of Ger car industry got busted, now that diesel engines are about to get forbidden inside cities plays a role in future production hence the parabolic spread between them. Usually metals are trading in contango, when in violent backwardation moves like this 4SD event, maybe its a delivery issue in one of the future contracts as the whole curve inverted, therefore leasing rates going higher to kill the arbitrage. Pal market it's not that big maybe some of the specs got cornered. I faded the fib confluence (red area) and stopped and then opened the "revenge" trade in futures and its profitable so far. Usually, that kind of violent moves mark a significant high. Off course nothing is guaranteed and we can see this going to a 5 or 6SD move, but this can be faded too. FWIW, if C&H valid between 2001 and 2018 high, then PO>2,100. Cheers, P.
dshen1
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@pantheo, thank you very much for your explanation. I read an article technology.matthey.com/article/57/4/281-288/ There can be many different loadings of platinum group metals in auto catalyst, and Palladium achieves only marginal improvement vs Platinum in all their technical review. Rhodium is the best. There used to be a 2:1 substitution between Palladium and Platinum when Palladium is way cheap, but now Palladium cost almost 1.7 times more than Platinum, so there can be a reverse movement if auto makers decides to switch. After all each auto catalyst converter about 5 to 6 gram of mixed metals. Like Natural gas market, Palladium movement is highly driven by managed money, not by commercials. These two are the most crowded long trades by hedge funds based upon Dec. 18th CFTC open interest data. Thank you again.
pantheo
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@dshen1, Thanks for the article! True, natural gas was a great fade. Pal looks like it will be the next one, we see. Last COT net positions DEC 18TH though doesn't hint to a top as of yet. When new figures will be released we will see. If net commercials short >-20K, then probably its a temp high. Cheers, P.