Palladium is starting to make a comeback thanks to industrial demand and short supply, jumping up in price by more than 20% in US Dollars over the past six weeks.

The price rise is a stark contrast to the fall from grace experienced in the last 12-18 months, and the current price of $1,056 per ounce (£805.45) is closing in on January’s record high of $1,100 per ounce.

The reason for the higher demand is the trade war, as well as other sanctions, with many analysts believing that palladium – as well as platinum potentially – are at risk of targeted tariffs. Russia is the primary producer of platinum-group metals (PGMs), and the country is currently under restriction from the United States. With China under similar (albeit greater) tariffs, it’s no surprise that the country might be stockpiling such palladium as a precaution.

Speaking to MarketWatch, R. Michael Jones – CEO of Platinum Group Metals – said: Car demand is solid across the world, and trends are toward big SUVs in the U.S. and small gasoline engines in Asia.” Jones’ claim is backed up by refiners and chemical specialists Johnson Matthey, who are predicting record demand for palladium this year at around 8.6 million ounces – up from last year’s all-time high of 8.4 million.

Such is palladium’s jolt up in price that it’s closing in on gold per ounce. The last time it achieved such a feat was in 2002, 16 years ago, but a limited interest in investment gold at a time of increased industrial demand for palladium has shrunk the gold-palladium ratio from three to just over one. This means that it takes a little more than one ounce of palladium to buy an ounce of gold, which is historically not the norm.

As major mines run low following years of easy mining, the cost of mining grows. Further exploratory surveying is needed, as well as new equipment for deeper, more difficult mining, and the physical construction of new mines – all whilst ensuring minimal environmental damage and adequate safety conditions for miners. This costs a lot, and mining firms and venture capitalists simply aren’t willing to invest until prices rise. Cue the tightening of supply. By mining a lesser amount of palladium, supply is quickly eaten up. Demand then pushes the prices up, as we’re experiencing currently.

The market sentiment now is that it’s definitely possible for palladium to trade at a higher price per ounce than gold, especially if gold demand stays subdued in the wake of the US Dollar’s strong spell, but if the US does introduce any sort of tariff or sanction on palladium then prices could fall off.