Palladium may see renaissance from funds

By Chikafumi Hodo

TOKYO (Reuters) - Lured by a relatively low price and cheaper investment costs, investors could well warm again to palladium, left in the cold by investors after market restrictions and price volatility in the early 2000s.

Palladium rose in March to its highest level since 2001, renewing investor confidence in the precious metal, and analysts say a bullish outlook for its sister metal, platinum, could help spark yet another rally.

Cash-rich investment funds could see palladium, used in car exhausts, jewellery and dental equipment, as an alternative to gold or platinum as both metals have hit lifetime highs.

"I see potential in palladium. It is still far behind the value of platinum and gold," said Akira Doi, director at Daiichi Commodities Co Ltd.

"As long as platinum is strong, palladium will be supported. Considering that it is well below its record highs, palladium could jump with fresh fundamentals," Doi said.

Palladium was quoted at $445 early on Wednesday, up more than 20 percent from the start of the year, after rising 10 percent in value in 2007.

At that price, palladium is still well below the seven-year high of $590 per ounce touched in March and about a third the value of its record peak of $1,150 set in January 2001.

Palladium's surge has been given a boost and would continue to be well supported by platinum's strength, traders said.