By Michelle Smith — Exclusive to Palladium Investing News
Supply and demand fundamentals have long painted a bullish picture for palladium. T he metal is very rare and mostly produced as a by-product of nickel and platinum. Despite this limited produ ction, lawmakers are inking legislation that essentially requires increasing demand. Given the situation, supply deficits appear inevitable. But the million dollar questions are when it will happen and whether investors will be on board or on the sidelines suffering from fatigue. Investors taking positions in palladium on the basis of supply concerns are often looking for tightness or disruptions in the near term. To the disappointment of many, past predictions of shortages have failed to come to fruition, and consequently market softness has set in as investors turn away. Many analysts are predicting that palladium will put up a stellar performance this year. The median Bloomberg analyst forecast has palladium averaging $850 in Q4 2012, which is a rise of more than 30 percent above current prices. Citigroup recently issued a research note expressing its bullish position and revising its 2012 price outlook up to $801. Furthermore, there are again predictions of a deficit this year. Barclays Capital, for example, sees the possibility of a 215,000 ounce shortfall. Optimism seems to be spreading to investors. Last month, reporting a surge in investment activity, Bloomberg revealed that palladium held in ETPs was 58.9 tons, surpassing the 43.5 tons held in platinum ETPs. With the release of its Global Commodity ETP Quarterly, ETF Securities noted that a revival of risk appetite drove significant increases of flows into pro-risk, pro-cyclical commodity ETFs, including palladium, which saw net flows of $186 million in Q1.