Palladium: Bound for Rebound?

Not everyone has given palladium the cold shoulder. A rebound in Japan's demand is expected to take some time, but robust growth is expected from China's automotive industry, which may provide support for palladium prices.

In November, following predictions by Johnson Matthey that palladium would jump by over 12 percent, the Gold Report expressed beliefs that palladium would outperform the other precious metals.

Johnson Matthey said the demand outlook for palladium is strongly weighted toward Chinese economic and industrial growth.

Lending credibility to these predictions, Reuters reported that once prices went below $700, Chinese buyers went in and starting purchasing palladium. The current prices make the metal a steal for China's auto industry.

Rohit Savant, senior commodities analyst with CPM Group, reported expectations of growing auto sales around the globe. He says overall, CPM Group remains fairly bullish with regards to the metal because they believe palladium's downfall is temporary.

In addition to the boost expected from automotive sales, there are also lingering suspicions that Russia, which has been the world's leading palladium supplier, has a dwindling (or perhaps exhausted) stockpile.

These rumors were fed by Victor Sprogis, Vice President of Norilsk Nickel. The VP announced that 2010 would be the last year when any significant amount of palladium would be sold on the open market by the Russian state. This led to fears of a supply deficit this year.

Even if Japan lowers its demand over the long term, losing the world's leading supplier may still have a major impact on availability. In addition to emissions systems, palladium is also used for electronics, dentistry, and petroleum refining.