Palladium Prices Gain on Auto Boom

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"Palladium hit a nine-year high this November."

Palladium hit a nine-year high this November and is looking bullish in the long and medium term considering the supply/demand situation.

According to analysts, the metal is at $740/oz. now and will go to $850 in about six months. At around 70% gain in prices since January, palladium has surpassed platinum and gold in the precious metals category.

Supply has remained almost flat since 2008, if not declined. Then, the global production was 7.31 Moz. In 2009, it dipped to 7.10 M while in 2010 it is estimated to be 7.14 Moz.

However, consumption has risen 11% from 6.3 Moz. in 2009 to 7 Moz. in 2010, primarily due to surging automotive sales, especially in China, which accounts for 22% of the global consumption.

As per 2009 estimates, 53% of the consumption happens in the automotive sector The rest is used in electronics, jewelry and dentistry.

Palladium investment demand in the form of ETFs is on the rise also, though still accounts for a negligible portion of the global consumption.

On the supply side, reports about depleting stocks in Russia have been doing rounds, triggering a price rise. The country has been releasing the stocks on a regular basis. However, the exact volume of stocks levels has not been made available.

Palladium prices were quite volatile over the past 10 years—from an April 2001 all-time high of $1,095 to a low of $140 in 2003. There has been a steady upward movement to a high of $590 in 2008, but it further dipped to $160 in October, from where it moved up and reached a recent high of $740 in November 2010.

While not dismissing corrections in between, analysts believe prices will touch a medium-term high of $850 and surpass all-time high levels in around four years.

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