Palladium is the lustrous white metal resistant to corrosion used in car catalysts and jewellery. It has gone from $826.40 (R11956.30) an ounce in September and almost doubled to a high of $1600.50 on March 20, but since then it has tumbled to $1354 an ounce on Friday - fuelling fears that its rapid rally has run out of steam.
Rene Hochreiter, an investment analyst at Johannesburg-based Noah Capital, said the palladium price had fallen on hedge fund activity, and the drop would likely be temporary. “This is very indicative of hedge fund activity. I think the palladium price will remain high", Hochreiter said on Friday. Nearly 60percent of the global palladium production goes into catalytic converters and 95percent of the vehicles sold in Europe.
Last week, Anglo American chief executive Mark Cutifani said the rapid palladium price rise had created a bubble.
"I disagree. We have 3million ounces in platinum exchange-traded funds (ETFs) and 0.7million in palladium ETFs. I am not sure where these metals’ prices will run to when stocks run out,” said Hochreiter.