After more than quadrupling in 2009-2010, palladium prices have been more-or-less stuck in a range for the past three years until a major break of the established trend-line on Tuesday.
Much of the demand for palladium comes from the auto industry, which uses it in catalytic converters to reduce emissions, but this is more of a supply-driven story. Johnson Matthey estimates that 78% of global palladium supply comes from South Africa (36%) and Russia (42%).
We all know that Russia is in hot water over its unwanted occupation of Ukraine, but South Africa is currently in the throes of an ongoing mining-strike where unions are demanding entry-level wages be doubled. Even under fairly standard operating conditions in 2013, the palladium market operated at a supply deficit equivalent to 9% of demand. With such a huge percentage of supply in jeopardy there is no telling how high prices could run.
In addition to the compelling fundamentals, palladium, like gold, is a real asset that should continue to benefit from the global monetary experiment still in progress.