Palladium Prices Hit Two-Year High

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". . .investments in ETFs "crowded out" the metal available to other buyers."

Palladium prices hit a two-year high on Monday but crude oil faltered after making early gains while gold moved lower as the dollar strengthened.

Palladium reached $477 a troy ounce before easing back to $467, down 1.7%.

Palladium prices have risen by a quarter since November as government sponsored car scrappage schemes have supported demand for the metal which is widely used in vehicle catalysts.

Hedge funds have been increasing their bets on palladium prices rising further with the speculative net long position standing at a record high.

The launch of palladium and platinum exchange traded funds in the US has also attracted fresh investor inflows for both metals.

Michael Jansen at JP Morgan said that investments in ETFs "crowded out" the metal available to other buyers.

"We continue to see the combination of a structurally robust market in terms of supply and demand factors, coupled with physical ownership (via ETFs) by investors as bullish for prices," said Jansen.

Platinum rose 1% to $1,589 a troy ounce amid concerns that production in South Africa could be affected by power supply problems.

Walter de Wet, commodity strategist at Standard Bank noted reports that South Africa's government might not extend (funding) guarantees to Eskom as the power utility was struggling to raise debt for capital expansion.

This would add to the list of issues that provides support for platinum and palladium prices," said de Wet.

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