It looks as if the rebound in palladium prices that began in early October has finally run out of steam, as prices dipped for two successive days this week.
 
The eurozone crisis continues to take its toll on risk appetite, with investors opting for safe-havens such as the US dollar rather than metals like palladium. If the eurozone crisis does prompt a major financial fall-out, then economic growth will be significantly impaired, drastically reducing demand for metals such as palladium, which is used heavily in manufacturing. Further weighing on the price was a report from producer Johnson Matthey, which said that this year’s surplus of palladium would reach its highest level since 2007, as a cut in investor holdings of the metal (exchange traded funds are expected to sell 215,000 ounces of palladium this year, compared to purchases in 2010 of 1.1 million ounces) and increased palladium recycling outweighed the impact of higher industrial consumption.
 
However, Johnson Matthey added that demand would outweigh supply next year, as Japanese carmakers returned to full production levels after this year’s earthquake and tsunami, while Russia, which has significant state-owned reserves, is likely to release lower amounts into the market. Johnson Matthey forecast that the price would range between $500 and $800 per ounce in the next six months.