Gains Seen for Palladium


"Spot palladium rose to $617.50/oz. Monday."

Investor interest in palladium isn't over, and the metal will likely build on the near 10-year high it hit Monday as a result, analysts said.

Spot palladium rose to $617.50 a troy ounce early Monday, the highest since June 2001. In mid morning, it was trading at $606 per ounce. Spot gold was trading at $1,345.10 per ounce, up 1.3% from Friday's closing level.

"From the perspectives both of supply and demand, the palladium market looks set to tighten further—and in the short term, palladium is in the hands of investors and speculators whose love affair with the metal shows little sign of abating," said UBS Analyst Edel Tully. He said palladium's rise was largely due to buying by funds, which boosted the price to levels that triggered further purchases.

The introduction of palladium and platinum ETFs in the U.S. at the start of the year was an important catalyst to boosting the industrial precious metals, which are used largely in equipment to clean car exhaust.

"Much of the reason for this year's rally is due to strong investor demand for ETF Securities' U.S. PGM ETFs," HSBC Analyst James Steel said. "Investor demand for hard assets has intensified in recent months, ignited by the resumption of quantitative easing policies in and outside the U.S."

ETFs' holdings of platinum and palladium are again on the rise after stagnating in the middle of the year. In October so far, platinum holdings are up 40 Koz. or 4%, and palladium holdings are up 117,700 oz. or 7% since September, Macquarie research shows.

Last week, HSBC raised its 2011 and 2012 forecasts for palladium. It kept its forecast for the 2010 average price at $525/oz. but raised the 2011 to $675/oz. from $425. HSBC raised its 2012 forecast to $650 oz. from $375.

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