Palladium Market Update (February 28, 2013)

Palladium prices averaged $715 in January, with a high of $760 for the month. By February 13, the metal was trading at over $772, the highest level since September 2011.

Supply concerns were prominent at the start of the month and were stoked when Anglo American Platinum (OTC Pink:AGPPY) reported production declines in its annual report. The metal gained more support from the miner last week, when violence sparked by union rivalry briefly interrupted operations at its Siphumelele mine. However, by mid-week the situation had calmed down and the staff had returned to work.

The metal got a boost from news of severe air pollution problems in China, which prompted the government to announce a series of temporary measures. That was interpreted as bullish for palladium, which is the dominant metal used for the fabrication of autocatalysts in vehicles sold in the nation.

Palladium prices saw a sharp drop, from $765 on February 20 to $729 on February 21, following news of a decline in Europe’s auto sales in January. However, as has been seen this year, when the metal responds negatively to European data, prices tend to quickly recover. Palladium was trading at $748 on February 27.

Analysts remain bullish and investors continue to show a strong preference for palladium. The most recent Commitment of Traders report reveals that last week, net speculative length increased for only one precious metal: palladium. ETF investors are also supporting the metal; over the past week, they added over 49,000 ounces.