The 1.6 million-ounce deficit seen by Standard Bank Plc explains why prices for the metal used in catalytic converters will rise 24 percent by Dec. 31, based on the median estimate in a Bloomberg survey of 24 analysts and traders. Autocatalysts are fitted to 95 percent of new cars and global sales will rise 5.1 percent to 76 million this year, according to Oxford, England- based J.D. Power Automotive Forecasting.

While commodities plunged the most since 2008 in the first week of May, prices are rebounding, with demand for cars signaling that the global economy is still expanding. The supply crunch in palladium is mirrored in copper, corn and crude oil, prompting Goldman Sachs to predict a 20 percent return from commodities in 12 months and Morgan Stanley to forecast the highest-ever oil prices.

"The long-term story is excellent," said Robin Bhar, a London-based analyst at Credit Agricole SA and the most accurate of 20 palladium forecasters surveyed by the London Bullion Market Association in 2009. "With any commodity that gets a very restricted supply base, you're always going to get worries. We will see stronger growth."

Eoin Treacy's view Palladium went from being the leading precious metal in September to being a laggard during the most recent advance for the sector. However, the medium-term uptrend remains relatively consistent. The reaction, which commenced with the large weekly key reversal towards the end of February, has been limited to a reversion towards the mean similar in size to that posted last year. Palladium, found support near $700 and the 200-day MA and has now rallied to test the 3-month progression of lower rally highs. A sustained move above $800 would indicate a return to medium-term demand dominance.