FocusEconomics: Palladium Prices to Pick Up By Year End

Palladium prices have on the downtrend for the past year, but this month, it looks as if things could be picking up for the white metal.
Palladium prices have gained roughly 12 percent, or $61 over the past month, and the metal is up 21 percent since hitting a low of $467 per ounce on January 12.
Still, in the March edition of the FocusEconomics Consensus Forecast Commodities report, the firm pointed out that palladium prices are still sitting near historic lows. “On 11 March, the price of palladium closed the day at USD 576 per troy ounce, which was 10.6% higher than on the same day in February and was up 3.8% on a year-to-date basis,” the report stated. “However, the price was 27.7% lower than on the corresponding day in 2015.”
Certainly, China’s economic slowdown, along with weak global growth, has kept pressure on palladium prices. What’s more, FocusEconomics stated that “a broad selloff among investors” has been putting additional pressure on the metal.

Certainly, that falls in line with predictions for palladium prices at the end of last year. For most of 2015 the continuing threat that the US Federal Reserve would raise interest rates (as it since has), put pressure on the entire metals sector, while a stronger US dollar and concerns over Chinese demand weighed on both platinum and palladium over the summer.
Meanwhile, Macquarie analyst Matthew Turner told Reuters last November, “For palladium, I think it’s more that people were taken by surprise by the move down earlier [in 2015] … When it bounced back, they may have thought it was a good time to get out of the market.”
Still, despite a dip in early January, palladium has had a better start to 2016. There are certainly several factors that have given palladium prices a boost over the past month. “[S]igns point to steady industrial demand, which, along with recent weakness in the U.S. dollar, has led to a slight recovery in the price,” FocusEconomics said.
Palladium is used extensively in catalytic converters for gasoline vehicles., and strong auto demand from the US, combined with a supply deficit for the metal, is expected to help prices pick up towards the end of this year. Of 14 panelists surveyed by FocusEconomics, nearly all saw palladium prices rising by the fourth quarter of 2016, with the average price forecast coming in at US$643 per ounce.
Here’s a sample of how some forecasters are expecting palladium to perform by the final quarter of this year:

• BMO Capital Markets/JP Morgan (NYSE:JPM); $700
• Commerzbank (LSE:CZB); $650
• CPM Group: $540
• Deutsche Bank (NYSE:DB); $650

For 2016 overall, prices are expected to average at $599 per ounce. JP Morgan had the highest prediction for 2016 this month at $669, while Investec (LSE:INVP) forecast prices to average at just $470.
Certainly, while this month has been a good one for palladium so far, the metal isn’t quite out of the woods yet. Investors will be looking out for more supportive news for the metal heading into the spring.

 

 
Securities Disclosure: I, Teresa Matich, hold no direct investment interest in any company mentioned in this article.