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Last year, palladium prices exceeded expectations, but the metal, has also lost some shine with some investors. However, if predictions are correct and the downfall is temporary, palladium may still be full of opportunity.
By Michelle Smith – Exclusive to Palladium Investing News
The following the March 11, 2011, quake, closing price palladium dropped to a 3 month low of $684.50 April 19’s closing price was $737.
Last year palladium could have played a leading role in a Sunday afternoon drama. The metal was like a step-child, overshadowed by her more popular and adored sister– platinum. And, as the predictable plot goes, it was actually the stepchild who was the star.
In 2010, palladium was the precious metal whose value increased the most. It had gains of over 95 percent, providing some investors with very meaty returns. By the beginning of this year, the metal had earned its clout, demanded attention in its own right and was predicted to soar and bring more meat to the investors’ table. However, since the metal is highly affected by the automotive industry, the events in Japan have taken a toll on those expectations… for some.
Recognizing opportunity
Not everyone has given palladium the cold shoulder. A rebound in Japan’s demand is expected to take some time, but robust growth is expected from China’s automotive industry, which may provide support for palladium prices.
In November, following predictions by Johnson Matthey that palladium would jump by over 12 percent, the Gold Report expressed beliefs that palladium would outperform the other precious metals.
Johnson Matthey said the demand outlook for palladium is strongly weighted toward Chinese economic and industrial growth. The Gold Report agreed that the metal’s success was largely dependent on China, especially the automotive sector.
Lending credibility to these predictions, Reuters reported that once prices went below $700, Chinese buyers went in and starting purchasing palladium. The current prices make the metal a steal for China’s auto industry.
Rohit Savant, senior commodities analyst with CPM Group, reported expectations of growing auto sales around the globe. He says overall, CPM Group remains fairly bullish with regards to the metal because they believe palladium’s downfall is temporary.
In addition to the boost expected from automotive sales, there are also lingering suspicions that Russia, which has been the world’s leading palladium supplier, has a dwindling (or perhaps exhausted) stockpile.
These rumors were fed by Victor Sprogis, Vice President of Norilsk Nickel. The VP announced that 2010 would be the last year when any significant amount of palladium would be sold on the open market by the Russian state. This led to fears of a supply deficit this year.
Even if Japan lowers its demand over the long term, losing the world’s leading supplier may still have a major impact on availability. In addition to emissions systems, palladium is also used for electronics, dentistry, and petroleum refining.
Investor’s access
Optimism about palladium may also be read in a recent move by BlackRock, the world’s largest asset manager. On April 11, the company announced the launch of iShares Physical Palladium ETC (LON:IPDM), which uses metal bars whose value are set by London PM fix price to back debt securities.
For some investors BlackRock’s portal to palladium may be a bit too new for comfort. An alternative is the ETFS Physical Palladium Shares (NYSE: PALL), which was launched on Jan. 8, 2010 and saw a 72 percent rise in just shy of a year.