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Why the Volkswagen scandal sent palladium soaring

by , 28 October 2015

The Volkswagen scandal may have been bad news for platinum and Volkswagen's share price, but there has certainly been a beneficiary.

This is palladium. It has bounced higher in price since the scandal hit. And it's looking good for more.

Let's take a closer look…

Palladium benefited from the Volkswagen scandal

Towards the end of September, coinciding with the news that Volkswagen had been tampering with software controlling emissions from its diesel cars, palladium soared higher.

In fact, it put in its best week in four years, rising more than 9% in just five days.

This took the price of palladium off a five year low. And as Rhiannon Hoyle in Barron’s explains, it could be the beginnings of a new uptrend for the metal.

Why did palladium move higher?

Palladium greeted the VW scandal news well as its primary use is in the catalytic converters of petrol engines. This uses around 75% of the world’s palladium supplies.

Have a look at the price of palladium over the last year below…

Chart of the palladium price

On the other hand, platinum is used in the catalytic converters of diesel engines. The price of platinum fell on release of the VW scandal.

Palladium rose as investors’ hedged their bets that motorists are going to favour a move to petrol cars.

The future for palladium

Over the longer-term, demand is looking good for palladium. Petrol engines are the preference in America and China. In Europe, around 50% of cars have diesel engines.

At the moment, the rate of car sales is growing at its fastest rate in decades in the US. China has seen car sales falter, but with new stimulus measures, this should help to bolster the market.

The issue with VW may also dent confidence in diesel engines as being an environmentally friendly option.

So there you have it. Why the Volkswagen scandal sent palladium soaring.

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Why the Volkswagen scandal sent palladium soaring
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