Volkswagen scandal widens platinum-palladium spread

Platinum is taking major hit over Volkswagen scandal as it is expected to reduce the demand for the metal which is highly used in diesel cars.

Industry expectation is that Volkswagen scandal over diesel car emissions likely to reduce demand for diesel car in itself. Many people might have paid higher amount as it was portrayed that diesel cars were more environment friendly. 44% of the platinum production is used to prevent harmful gas emissions and more so in Diesel cars.

That notion is clearly under threat, moreover other manufacturer's diesel cars are also likely to face scrutiny over pollution.

Palladium on the other hand has benefited from the scandal as it is used in gasoline based cars. Palladium rose to its highest level in two months.

However, it is unlikely to change much in the longer term as platinum's use is unlikely to drop due to its extensive use. Volkswagen might choose to change some parts, which will instead of dropping is likely to increase demand for the metal.

So, price might drop and platinum-palladium spread might widen in the short term, there could be reversal ahead.

Platinum is currently trading at $933, whereas palladium at $642.