Perhaps overlooked in the precious-metals market with gold hitting record highs is the recent rally in exchange traded funds tracking platinum and palladium.

BofA Merrill Lynch analysts point out that platinum and palladium bullion stored in Switzerland is experiencing small outflows year to date and global inventory levels for both precious metals remain below recent highs, which has helped support prices, reports Nick Johnson for Platts News.

Additionally, the recovery in the auto industry has also helped platinum and palladium prices, since both metals are used in the production of catalytic converters for car engines. BofA Merrill Lynch analysts project that sales will reach 74 million units for 2011, with almost half that amount coming from emerging market demand.

“We anticipate China’s platinum demand to remain healthy,” said the analysts. Additionally, imports to Japan have “held up remarkably well” and U.S. platinum and palladium imports are above last year’s levels, the analysts noted.

Recent gains in palladium and platinum prices come on growing concern over a coal strike in South Africa that may cut power to mines, which produce around two-thirds of the world’s platinum and palladium, according to Kitco News. Electricity shortages struck South African mines in 2008 and led to a surge in prices as mining operations diminished output.

ETFS Physical Palladium Shares (NYSEArca: PALL) and ETFS Physical Platinum Shares (NYSEArca: PPLT) are up 14.5% and 7.1% over the past month, respectively.

  • ETFS Physical Platinum Shares

  • ETFS Physical Palladium Shares

For more information, visit our platinum or palladium categories.

Max Chen contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.