Palladium Reaches 14-Year High on Miner Strikes

Worker strikes, fueled by the on going wage disputes in South Africa have had a positive impact on palladium prices. This week, palladium shot up to its highest level since early 2001. The metal was trading at a 14-year high of $862.50 an ounce on Wednesday with investors largely driven by concerns that a mining strike in South Africa could “chock off supplies at the same as an over-exuberant auto-manufacturing world drive demand for the car-exhaust metal”.

Speaking with Reuters, Quantative Commodity Research director, Peter Fertig explained that “Palladium strengthened on the back of the strike situation in South Africa… the collapse of the mediation talks has been the main trigger, clearly indicating the supply situation is tightening.”

With palladium’s demand stemming from its industrial use in catalytic converters, the rise in auto sales stemming from China has increased demand for the metals.

“The rise in passenger vehicle sales in China bodes well for palladium demand, as it implies greater vehicle production and more auto catalysts,” Standard Bank noted.

With the strike nearing five months, uncertainty surrounding its resolution has created some bullishness in the market.

“There is no reason to sell palladium right now,” said Frank Lesh, a broker at Future Path Trading, “This thing can go up to $1,000.”

As always, for every bull there is a bear. In this case, some traders are not convinced that should the strikes come to a resolution that palladium will be able to sustain their current highs. The Wall Street Journal highlights palladium prices dropped 5% in the month following the end of a strike in September 2012. Furthermore, the question of if increased demand from the auto industry could buoy prices is uncertain.

CPM Group’s Rohit Savant cautions investors that they “will have every excuse to sell above $850 per ounce,” adding that “Breaking much further above that won’t be easy.”

Securities Disclosure: I, Vivien Diniz, hold no investment interest in any of the companies mentioned.