Palladium Still Reigns Supreme Over Precious Metals

As June drew to a close, RBC Capital Markets echoed GFMS’ prediction that palladium will spend 2014 in deficit, citing continued increases in autocatalyst demand and declining Russian stockpiles.

The firm forecasts that the metal will see an 800,000-ounce deficit in 2013, with prices hitting $750 per ounce; in 2014, RBC believes palladium prices will rise to $850 per ounce, although it does note that prices could face pressure if aboveground palladium supplies amassed in previous years are used.

Similarly, Reuters revealed yesterday that collectively, 20 analysts, traders and fund managers that it surveyed believe palladium will average $740 per ounce this year — that’s only slightly down from the $750 forecast in a similar poll conducted in April and substantially up from 2012′s average price of $641. Next year, they expect the precious metal to rise to $800.

Commenting on the results, UBS analyst Joni Teves told Reuters, “[o]f the four precious metals, palladium has the most compelling fundamental story. Investors like the metal this year … as they are expecting the global economy to be performing better, and this means brighter demand prospects for palladium, given its exposure to the U.S. and emerging markets auto sector.”

Palladium ETFs beating gold

While the best ETF Trends’ Tom Lydon has to say about exchange-traded funds (ETFs) backed by gold is that they “have been less bad in recent weeks,” he notes that ETFs backed by palladium have fared much better.

Lydon states that while the ETFS Physical Palladium Shares (ARCA:PALL) “was unable to withstand the May/June plunge that plagued precious metals,” it has since rebounded, gaining 15.1 percent, a more favorable increase compared not only to gold ETFs, but also to silver and platinum ETFs. With its “encouraging fundamentals,” he believes it may become the best way for ETF investors to get into precious metals this year.

For those looking for equity plays on rising palladium prices, he recommends looking at the iShares MSCI South Africa Index (ARCA:EZA), which has climbed 6.1 percent in the last year.

Junior company news

Last month, Colossus Minerals (TSX:CSI,OTCQX:COLUF) released a development update for the Brazil-based Serra Pelada gold-platinum-palladium mine, of which it owns 75 percent, noting that until the end of July, it would be focusing on “extending the excavation in the bulk sample access drift” so that it can build a 10,000-MT surface stockpile before mill commissioning begins in the upcoming quarter.

At the time of the release, project construction was 85 percent complete while structural steel erection was 55 percent finished; underground development was on schedule, as was other infrastructure development.

However, midway through July, the company hit a small setback after determining that some dewatering wells and pumps were not performing according to design specifications. While Colossus said in June that it hoped to reach initial production of 250 MT per day in the third quarter of 2013, it now expects a delay in gold production until late in Q4. It has redeployed resources and delayed mining activity through the central mineralized zone to ensure that it will still be able to produce 1,000 MT per day by the end of 2014′s first quarter.

Two days later, Prophecy Platinum (TSXV:NKL,OTCQX:PNIKF) started the 2013 field program at its Yukon-based Wellgreen platinum group metals-nickel–copper project. As part of the program, it plans to relog and and “comprehensively” analyze drill hole cores for platinum, palladium, rhodium, gold (4E), nickel, copper and cobalt mineralization with NI 43-101 quality control measures so that they can be included in the Prophecy’s updated 2014 preliminary economic assessment.

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

Related reading: 

Palladium Likely to Remain in Deficit Next Year, GFMS Says

Bound for Bullishness: Palladium Beating Analysts’ Expectations