Gold Rates Continue to Increase, Palladium Follows Suit

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The gold rate today has been on the rise against the backdrop of a weakening US index which slipped by 0.6 percent. Spot gold went up by 0.42 percent to trade at $1290.25 for an ounce. Meanwhile, the domestic prices in India also followed global trends to increase by Rs. 100 to Rs. 32,800 per 10 grams. This is partly due to the growing demand for the bullion as the marriage season draws near.

Silver prices in India increased by Rs. 300 to Rs. 40,100 per kilograms when freshly procured from coin makers and industrial units. Local jewelers are rapidly buying more gold and silver to meet the domestic demands, which will increase during the wedding season in India, a festive occasion where families splurge a significant portion of their wealth on precious metals.

It’s unsure how the recent changes made to the Gold Monetization Scheme (GMS) will impact gold prices in India. The Reserve Bank of India (RBI) introduced a few tweaks to the GMC, which will now allow charitable institutions, state government, and central government to participate in the scheme.

GMS was first launched by the Indian government to mobilize gold held by institutions and households across the country. According to the scheme, people can deposit their gold holdings in bank vaults in exchange of interest that varies from 2.25 to 2.50 percent depending on the bank and the amount of gold placed.

The precious metals market as a whole seems to be on the rise, with Palladium meeting its all time high on Wednesday after the Chinese government talked about enforcing new policies to buy more domestic automobiles. Palladium surged by 0.49 percent to $1,325 for an ounce, briefly touching the record high of $1,342.43 earlier. Spot palladium settled around $1,273 for an ounce on Thursday.

The price difference between rival platinum and palladium is now more than $500 an ounce. This also means that palladium is now the best precious metal of 2018 and 2019.

As the Chinese government increases domestic spending on commodities such as home appliances and automobiles this year, it will automatically create more demand for palladium, a key ingredient in the production of environment-friendly catalysts. Analysts also believe that the supply for palladium in the market won’t increase to meet the demand anytime soon.

According to Citigroup, a large deficit to the tune of over 600,000 ounces in supply and demand will support rising prices. The trend will likely continue until 2020.

Palladium is rarer than most precious metals, with the bulk of it being mined in South Africa and Russia as a byproduct of platinum and nickel mining. If supplies don’t improve any time soon, the widening premiums might convince automobile manufacturers to switch from palladium to the much cheaper platinum, which may decrease further gains in the future.

The only problem is that making a switch to platinum isn’t easy and according to Rahul Mital, the Global Technical Specialist at General Motors. According to Mr. Mital, the process could anywhere between 18 months to two years.