Hedge funds are siding with analysts predicting decade-high palladium prices even as investors cut holdings in exchange-traded products backed by this year’s worst-performing precious metal.
The funds’ wagers on a rally more than doubled since August as ETP holdings slumped to a seven-month low this month, data compiled by Bloomberg show. Prices for the metal used mostly in catalytic converters will average $800 an ounce in the third quarter, 34 percent more than now and the highest since 2001, based on the median of 13 analyst estimates.
Speculators that slashed bets to the lowest level since 2009 in May as growth slowed are now more bullish after central banks from the U.S. to Europe to China pledged additional measures to boost economies. Palladium’s 8.9 percent retreat this year contrasts with an 11 percent advance in platinum, driven by mine strikes and violence in South Africa, the biggest producer of the metal also used in autocatalysts.
“Platinum got the South Africa boost but palladium didn’t enjoy that,” said Jeffrey Sica, the Morristown, New Jersey- based president of SICA Wealth Management, who helps oversee more than $1 billion of assets. “I do anticipate higher prices because of the global liquidity push. At some point there will be growth revival.”