Palladium could test its historic high in 2011
Over the past year, the price of palladium has more than doubled from US$353 to a recent high of $767 an ounce—its highest level since early 2001.
Over the past two years, demand for palladium has increased, depleting palladium inventories worldwide. In 2011, demand is forecast to exceed supply for the first time since early 2001, when palladium leaped to $1090.00 an ounce during a market panic when Russia (the world’s leading palladium producer) threatened to withhold its stockpiled palladium from the world market.
Ten years later, Russian palladium reserves are reportedly dwindling. In November, a Wall Street Journal article quoted an insider source who claimed that Russia’s palladium holdings are “practically nil” after decades of substantial stockpiling—which could cause palladium prices to spike upward once again.
Demand for palladium will certainly continue to increase as the U.S. auto sector recovers and the Chinese and Indian auto industries continue their roaring expansion. Palladium is primarily used as an autocatalyst in catalytic converters, and also has applications in dentistry, electronics, and other industries.
Putting additional pressure on this often-overlooked metal, stockpiles are being further diminished by non-industrial uses of the metal such as investment, Exchange-Traded Products (ETPs)—including Exchange-Traded Funds (ETFs)—coins (the USA is preparing to issue a 1 oz. palladium bullion coin) and jewelry.
Last week, ETF Securities Ltd. launched a new physical metal-backed ETF (traded under the ticker symbol WITE:NYSE) weighted 12% in palladium. On Monday it was reported that ETF Securities now holds almost 950,000 ounces of palladium in its ETFS Physical Palladium ETP (PALL:NYSE), representing about 13 percent of worldwide annual net demand.
Demand for these metal-backed ETPs is increasing as investors, still not confident in the post-2008 economic recovery, seek out precious metals as shelter from volatile stock markets and depreciating currencies.
Shares in ETFS Physical Palladium (PALL:NYSE) have doubled since February. They currently trade at $73.14, $4.45 off its recent high of $77.59.
As the buzz over palladium builds, palladium miners have seen their share prices spike upward this year. Stillwater Mining Company (SWC:NYSE) stock has almost tripled from a low of $8.30 at the end of 2009 to a high of $22.86, and remains near its high at $20.07. North American Palladium Ltd. (PDL:TSX) shares have more than doubled since September, currently trading at $6.24, 50 cents off its recent 52-week high of $6.74.
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