Palladium Shifts Into High Gear [ETFS Physical Palladium Shares, Sprott Physical Platinum and Palladium Trust]

Car Sales Drive Palladium Demand. Palladium is an industrial metal as well as a precious metal. That’s because it is a major component in catalytic converters, which account for 68% of all palladium demand.

When I wrote my original piece on palladium back in November, I said “Hard-pressed consumers put off buying cars for too long, and now they’re dumping their clunkers and buying new wheels.”

Well, sure enough, auto sales are accelerating… faster and faster!

In fact, in June, U.S. car sales rose 1.2% to 1.4 million. Annualized, that would push the selling rate to 16.98 million – the fastest pace since 2006.

And automakers sold 8.2 million total vehicles in the U.S. in the first half of 2014. That’s up 4.3% over the same year-ago period.

Car sales are booming globally as well. China saw its passenger-vehicle sales rise 14% in June. And for the first six months of 2014, China’s car sales rose 11% to 9.09 million units.

That’s a lot of palladium demand.

Investment Demand Is Surging. In fact, investor demand is gobbling up millions of ounces of palladium from the market as ETFs make it easier than ever to invest in the metal. This type of demand is relatively new in palladium compared to gold.

Palladium ETFs saw 844,000 ounces of net inflows in the first half of 2014. Total holdings in palladium ETFs were recently just under 3 million ounces. That’s more than the annual production of Russia, the world’s No. 2 palladium producer.

We know that ETFs can buy and sell into a market, whipsawing prices. But for now, however, demand for palladium as an investment is up, and that’s pushing up prices.

Strike May Not Be Over. The strike in South Africa was hard on both sides. Its resolution added about 8% to the cost per ounce of palladium. So no one would ever want to do something like that again, right?

Well, now there is another mine-worker strike in South Africa. This strike isn’t in the palladium mines – yet. But the fear is it will spread. And if it spreads to the palladium mines, prices could really take off.

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