Investing.com - The lure of palladium and its importance to the auto sector is greater to precious metals investors than the shine of gold and the hedge the yellow metal offers to the world's political and financial troubles.
The spot price of palladium, the auto-catalyst metal preferred by investors compared to its sister metal platinum, soared to record highs above $1,400 per ounce on Thursday. That made the metal the world's most valuable metal currently.
Spot palladium was up $30.80, or 2.3%, at $1,394.35 per ounce by 2:18 PM ET (19:18 GMT) after reaching an all-time peak of $1,440.35 earlier.
In futures trade, the benchmark March palladium contract on the New York Mercantile Exchange's Comex was up $34.30, or 2.6%, at $1,352.80, after an intraday peak at 1,397.40.
While palladium is at least $500 short of the record highs above $1,900 per ounce hit by gold in 2011, its near 70% rally since August, with 10% of that coming just this month alone, has stunned investors.
Gold prices, have, meanwhile treaded water at the $1,285 to $1,295 level after briefly breaking past $1300 on Jan. 4.
Palladium's latest run-up has been fueled by stimulus measures aimed at boosting car ownership in China and a projection by Metals Focus Ltd. that the auto-catalyst metal will remain in a supply deficit for an eighth straight year as its status as a byproduct of mines in South Africa and Russia restricts its output despite explosive short-term demand.
“Palladium has entered uncharted territory,” after topping technical barriers such as the 50-, 100- and 200-day moving averages, Thomas Anthonj, technical analyst at JPMorgan Chase & Co (NYSE:JPM). in London, was quoted saying by Bloomberg. “In such cases, the only orientation we have is from a technical perspective.”
But some are skeptical about the rally going too much further.
“Investors appear to be ignoring the fact that weak sales figures have been reported for all major auto markets in recent days,” Commerzbank (DE:CBKG) analysts including Daniel Briesemann said in a note. “Instead, they are seeing news such as the planned widening of a strike to include the platinum mines of a major South African gold and platinum producer as being a good reason to buy.”
Philip Streible, senior market strategist for precious metals at RJO Futures in Chicago, also thinks a violent reversal may be coming.
"It's hard to say how the mine strike will stay in place," said Streible. "Palladium could easily push past $1,500, but I expect it come down to more normalized levels closer to the $1,250 area. A small crash could probably kick a lot of people off guard."
Gold futures on Comex was down $1.95, or 0.2%, at $1,291.85.
Platinum futures rose by $4.10, or 0.5%, to $812.
Silver futures slid 11 cents, or 0.7%, to $15.53.
In base metals, copper futures were flat at $2.68 per pound.