Palladium prices soared to nearly $800 per ounce, their highest for two and a half years, last month. After staying in the $770~$790 range, it fell today with June futures last trading at $768.75, down 2.8% on the day and recovering slightly from a day low of $761.25.
HSBC’s James Steel and his team published a note late last week discussing platinum group metal prices, which they see as benefiting from tighter fundamentals, in part due to labor strikes in South Africa.
Steel is bullish on palladium prices where global supply is constrained. “Rising automotive demand from China and North America is particularly relevant to palladium due to the need for this metal in the gasoline-fired engines favored in these regions. We expect average prices to reach $825/oz in 2014“.
Today, ETF Securities’ Mike McGlone and Nicholas Brooks are striking a similar tone, noting that platinum prices jumped 3.1% last week, while palladium rose 2.3%. They write that the South African mining strikes, going into their 11th week, continue to make themselves felt in prices as producer struggle to meet their contractual demands despite stockpiles. They too see rising auto demand conspiring to keep prices rising
More recently the price has been supported by the launch of two new exchange traded funds (ETFs) in South Africa backed by physical palladium. Demand has been strong and the two funds are already estimated to hold about 250,000 ounces of the metal.
“While the headline number may seem bullish, we also note that 120,000 ounces have been a switch of existing holdings in offshore products to the local listed ETFs,” cautioned Standard Bank in a report.