Is Palladium Going To $1,200?

Is Palladium Going To $1,200?

[heading]Is Palladium Going To $1,200?[/heading]

Palladium has risen to its highest level since 2011 due in part to escalating tensions in Ukraine, in particular that the supply of palladium from Russia, the world’s biggest producer, will be restricted. In 1999-2000 palladium ran to $1,200. Could it be heading to its old high?

Politicians and banks are suggesting increased sanctions against Russia’s banking and finance system, worsening the situation and increasing the likelihood that supply will be cut off.

Palladium has increased 13 percent this year as the threat of disruption to Russian exports added to supply concerns amid a miners’ strike in South Africa, the second-biggest producer. The introduction last month of two-exchange traded products backed by the metal tried to temper the volatility.

“Rarely have there been such favorable conditions in terms of strong demand versus disrupted supply,” Steven Scacalossi, the head of global metals sales at TD Securities in Toronto, said in a report. “Palladium is the market in the spotlight.”

Palladium futures for June delivery rose 0.6 percent to close at $811.50 an ounce at 1:10pm on the New York Mercantile Exchange.

UKRAINE

The situation in Ukraine has raised global geopolitical tensions and the western powers have made it clear they wish to support the new government in Ukraine, while Russia has sent troops to the border.

7 percent of deposits were drained from Ukrainian banks in the week after the fall of Kiev, and Ukraine is moving to institute cash withdrawal restrictions. Ukraine has sought billions of dollars in aid already.

Russia has considered reducing its reliance on the US.  A Kremlin economist, Sergei Glazyev, told RIA Novosti that this would lead to a crash of the US financial system.

“We would find a way not just to reduce our dependency on the United States to zero but to emerge from those sanctions with great benefits for ourselves,” said the Kremlin economic aide.

“We have wonderful economic and trade relations with our Southern and Eastern partners,” he said. “We will find a way not just to eliminate our dependence on the US but also profit from these sanctions.”

Obama has already stopped trade and energy talks with Russia. As The State Department said: “At this point, we are not just considering sanctions. Given the actions Russia is taking, it is likely we will put those in place and we are preparing that.”

The Ukraine Central Bank has already implemented capital controls:

  • Sets limits on foreign currency purchases.
  • Limits purchasees to 15,000 Hryvnia per person per day ($1,300).
  • Ukraine central bank limit purchases to 150,000 Hryvnia per person per month ($13,000).

From Reuters:

“The International Monetary Fund announced a $14-18 billion standby credit for Kiev in return for tough economic reforms that will unlock further aid from the European Union, the United States and other lenders over two years, effectively pulling Kiev closer to Europe.”

$1,200?

These heated tensions will continue to increase. Western companies reliant on palladium are buying to stockpile, and they will have to know when to stop this. In 1999 Ford went long palladium at the top of the market, and lost a lot of money.

For palladium to reach $1,200 more of the same will have to continue; i.e. tensions between the west and Russia. I foresee this probably taking place.

Interested in palladium as an investment? Learn more here.

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