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Firstly, wage negotiations in South Africa collapsed earlier in the week, which effectively resulted in a prolonged strike. Keeping in mind that South Africa is the world’s largest supplier of PGM, any disruption in mining there results in supply concerns. This ongoing issue is likely to continue underpinning palladium prices particularly as demand is also rising.
Palladium is used in car manufacturing, particularly for the catalysts in Chinese vehicles. As a result a sharp rise in China vehicle sales has been a significant driver of growth. With these factors combining, the fundamental picture looks quite good. From a technical perspective the price has grown from strength to strength.
Palladium has been in a strong uptrend since February and this week broke 2011 highs, resulting in it trading at its highest level since 2001. There is a good chance palladium will extend these gains in the near term. A pullback could be used as an opportunity to buy.