The price of palladium, a precious metal used to control harmful vehicle emissions, jumped on Friday, is on course to close at a three year high on Friday as investors piled in.
The precious metal rose by as much as 7 per cent to $917.40 an ounce, extending gains since the start of the year to 30 per cent, making it one of the best-performing commodities.
Analysts pinned the latest gains on a combination of factors: strong demand, rising investor interest and constrained supplies.
“Perhaps there isn’t one big explanation or a specific catalyst that has led to the recent market moves, but rather confluence of factors that have actually been brewing (and market participants) have been discussing for a while,” said Joni Teves, analysts at UBS.
Investors are warming to platinum because of shifts in the car market. Gasoline and hybrid vehicles, fitted with palladium-rich catalytic convertors, are becoming increasingly more popular with consumers.
At the same time, buyers are turning their backs on diesel-powered vehicles, which used platinum-rich autocatalysts. This is because they are worried about possible legislation changes in the wake of the Volkswagen emissions scandal.
That in turn has weighed on platinum, which has gained just 4 per cent since the start of the year and is currently at $940 an ounce. The last time the two metals traded at parity was in 2001.