Palladium prices soared above $1,000 per ounce driven by short covering and tight nearby supply. In London, spot palladium prices reached a one-month high, surging to $1,027 before settling at $947 per troy ounce, marking a 2.6% increase. This surge followed a recent low of $867.51, emphasizing the market’s volatility.

The short-term liquidity tightness in the market was evident through the exchange of futures for physicals (EFP), indicating a potential short squeeze. With money managers holding record short positions in palladium futures and a significant withdrawal of metal from the market due to sizable ETF allocations, the stage was set for a potential rally.

London faced a scarcity of palladium bars, particularly with Russian bars losing their “good delivery” status post the invasion of Ukraine. Despite a 39% decline in palladium demand in 2023 due to the rise of palladium-free electric vehicles, the market saw a turnaround in 2024. This shift was attributed to the increasing sales estimates for hybrid cars that require palladium, along with an ongoing structural deficit in the market.

Experts predict further deficits in 2024 and 2025, leading to a tightening of liquidity and a subsequent price increase or support. Wilma Swarts, head of platinum group metals research at Metals Focus, highlighted that above-ground stocks have hit record lows this year, dating back to 1980.

Palladium, a crucial component in autocatalysts for reducing emissions, plays a pivotal role in the automotive industry. The top palladium producers include South Africa, Russia, and North America. The current market conditions, coupled with the evolving demand dynamics, suggest a positive outlook for palladium prices in the near future.

As the palladium market continues to witness fluctuations driven by supply dynamics and investor sentiment, the industry remains poised for further developments. The interplay between geopolitical events, market forces, and technological advancements will likely shape the trajectory of palladium prices in the coming months.