London: Gold just got left behind by one of its sister metals. After a demand-fuelled rally over the past four months that’s seen prices hit a record high, palladium topped gold.

Palladium, which hasn’t traded at a sustained premium to gold in 16 years, has gained as buyers scramble for supplies of the metal used in vehicle smog-control devices. Demand has risen as consumers turn away from diesel toward gasoline-powered cars, which tend to use more palladium in autocatalysts.

“People are grasping for whatever ounces of material they can get” in the palladium market, Tai Wong, head of base and precious metals trading at BMO Capital Markets, said before Wednesday’s levels were hit. “It’s very expensive to borrow, and that is perhaps the biggest factor driving the spot price higher.”

Palladium for immediate delivery climbed as much as 1.9 per cent to a peak of $1,255.83 an ounce, and was at $1,245.67 at 11.17am in London, according to Bloomberg pricing. Spot gold was 0.1 per cent lower at $1,237.34 an ounce.

Palladium’s deficit is set to widen to about 1.4 million ounces in 2019, adding to a shortfall of 1.2 million ounces this year, according to London-based Metals Focus Ltd Supply is likely to remain broadly stable in 2019, while there will be growing demand from the automotive sector, according to Junlu Liang, a senior analyst at the consultancy.

This year, the metal has benefited from quite significant stockpiling from China, however that may slow given the recent surge in prices.

“The supply of palladium is very restricted,” said Chirag Sheth, a Mumbai-based consultant with Metals Focus. “The narrowing of the ratio is as much about the strong performance of palladium as about the poor performance of gold.”