Nitesh Shah, Director, Research, WisdomTree looks at the drivers behind palladium prices reaching a new high.
“Palladium prices hit a fresh high this week, reaching US$1685/oz intraday on Monday 30th September. There has been in a supply deficit in palladium for seven years running and the metal is forecast to be in a deficit this year as well(source: Metal Focus). Demand for the metal used to abate pollution from cars has increased in recent years and is likely to continue that trend as environmental standards tighten across the world. With wage negotiations underway in South Africa, the risks of strikes are rising. With close to 40% of mine supply from South Africa, that poses a material risk to global supplies. Above-ground stocks of palladium could fall to 12.9mn ounces, providing only 14.4 months of demand cover (source: Metal Focus).
“What is surprising is that speculative positioning in palladium futures is not elevated. Unlike other precious metals, where positioning has increased steeply in the last few months, palladium positioning looks tame. That indicates that recent prices gains have been driven more by supply tightness and less by investor demand.”