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Palladium rose 10.3% in March, and by 3rd April reached $221/oz, its highest fix since September. As with platinum, palladium has been boosted by glimmers of a recovery in its demand prospects (and currently we can't be more optimistic than this).

The largest single market, US automobiles, is still in dire straits, but it is hoped that March's sales of just 35% lower year-on-year, are the start of a recovery in this market. February saw a 40% drop while January was down 38%.

Of course the year-on-year comparison is not what it once was as it is against a lower and lower base, so perhaps more important is that car sales are rising on a monthly basis - the 817,500 units in March 2009 was the highest amount sold since December 2008.

There is also greater optimism over China, where there are some signs that the economy is expanding. The official purchasing managers' index (PMI) rose in March to 52.4 from 49.0 in February, while just as recently as November it was 38.8. A score over 50 signals an expansion. This is positive for palladium in two regards.

First through auto sales, as Chinese cars' catalysts are mainly palladium (and reports are that Chinese March sales were very strong), and second through other industrial demand, such as electronics.

Investors now hold 799,366 oz in the two exchange-traded funds, an all-time peak. However they have not responded as significantly as those in platinum, with just 12,561 oz added in March. Perhaps it is a case of once bitten twice shy, or be in palladium' case ten times bitten, as the metal has repeatedly failed to live up to the expectation that the gap between it and platinum will narrow.

Palladium Outlook
Palladium has been very strong, even though ETF investment demand in March was relatively mild. The potential of a US palladium ETF is helping sentiment but signs of a pickup in demand are the main factor particularly as there is some evidence that its cheapness is seeing it substituted for other metals, especially platinum. But as ever there remains a risk of a sharp reversal if hopes are dashed.

Short-term London fix: $190/oz-$240/oz.

Some Palladium News 
April 1st: Chemists at Brown University in the US say they have developed a way of producing palladium nanoparticles with a surface area 40% greater than possible with existing techniques. The breakthrough could help developers of fuel cells.

March 16th: US palladium miner Stillwater announced a $132m loss in Q4 08 on production of 498,900 oz of PGM, down 7.2% over 2007. Projected output for 2009 is 495,000 oz.

March 12th: DisplaySearch, a research group, believes the LCD TV market will grow 35% in the next two years despite the global slowdown.

Courtesy: Fortis Metals Monthly

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