Like other precious metals, palladium has been weakening, but palladium spot prices and the related exchange traded fund could turn around as the fundamentals move in their favor.
The supply and demand fundamentals points to a bullish palladium market, with a widening supply deficit starting and rising industrial demand, reports Rosalyn Retkwa for Institutional Investor.
So far this year, hedge funds have been shorting palladium due to the “risk on” environment and its industrial applications. Wiktor Bielski, global head of commodities research at VTB Capital, pointed out that industrial metals are trading like risk assets.
“I have to say that anybody playing the short side has done very well,” Bielski said in the article. However, “you can’t fight the fundamentals forever. The risk/reward is clearly skewed more to the upside.”
Russia stated that this will be the last year it will be exporting palladium from its Cold War stockpiles – Russia has been the second-largest producer of palladium, behind South Africa, accounting for over 46% of global annual production.
Johnson Matthey, a London-based precious metals refiner, calculates that Russia will export 250,000 ounces of palladium this year, down from 750,000 ounces in 2011. Additionally, Norilsk Nickel’s guidance projected 2.6 million to 2.65 million ounces of palladium mined this year, compared to 2.81 million ounces in 2011.