Having gained 7.5 percent in 2012, palladium outperformed gold, which only gained 7.1 percent. In the fourth quarter, the white metal's performance was even more impressive. With gains of 10 percent, palladium was the top performer of the precious metals complex. Many analysts predict that palladium will earn the title of top performer in 2013.
Analysts surveyed by the London Bullion Market Association (LBMA) for its 2013
are overwhelmingly bullish, and a number of them believe that no other precious metal has brighter potential than palladium.
The average palladium price forecast for 2013 is $744.03, an increase of over 15 percent from the 2012 average price of $644.33.
Rising palladium demand
The outlook for palladium demand is one positive factor underlying analysts' bullish sentiment.
Autocatalyst manufacturers are the largest consumers of palladium, and vehicle sales have increased at an average rate of 7 percent over the past three years, according to data from Scotiabank.
Economic conditions show signs of improvement in China and the US, the world's top auto markets. With middle-class growth and urbanization expected to continue, China is projected to be a key driver for the auto industry in 2013. US sales are expected to be strong largely due to replacement vehicle demand. And in emerging markets, where incomes are rising, gains are also expected.
In addition, CPM Group analyst Rohit Savant pointed out in the LBMA report that economic growth is likely to boost demand for semiconductors.
Overall, Scotiabank forecasts that sales growth of 4 percent will drive volumes to the fourth consecutive annual record.
Palladium supply deficit likely
The supply situation is likewise being cited as a bullish factor for the palladium market as many analysts foresee a deficit this year.