(Bloomberg) — Palladium prices are shattering record highs, and investors are betting that tight supplies mean the bull run is just getting started.
The metal, used in pollution-control devices in cars, has jumped almost 9 percent this year in New York, the best performance among major metals. Demand is roaring thanks to China, which is on a mission to reduce smog emissions. Tougher pollution standards mean carmakers are using more of the commodity in catalytic converters.
Global palladium production is falling short of the robust demand, and market forecasters including Citigroup Inc. are projecting further price gains ahead. Hedge funds are also wagering on an extended rally, with the biggest positive bet on the metal since early March.
“The market has a very positive fundamental outlook,” said Maxwell Gold, director of investment strategy at Aberdeen Standard Investments, which oversees $730 billion. “We’ve been dealing with supply deficits going on eight years, and that’s expected to continue. Supply’s certainly been an issue on the mining front as well as the draw-down of existing stockpiles.”
Palladium is a thinly traded market. Much like sister-metal platinum, its production is extremely concentrated, with Russia and South Africa collectively producing about three quarters of the world’s mined supplies.
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