Of all the precious metals, palladium is the metal to buy, according to Institutional Investor, as the supply is shrinking this year, while demand is rising.

Experts see a supply deficit starting this year. For one thing, Russia, the second-largest palladium producer after South Africa, has said it will stop sales from its Cold War-era stockpiles. The Soviet Union mined nickel in great quantities for military equipment, getting plenty of palladium as a by-product.

Russia will sell 250,000 ounces of palladium, which is used mostly in automobile catalytic converters, this year, estimates Johnson Matthey, a London-based precious metals refiner, down from 750,000 ounces last year, Institutional Investor reported. Plus, Moscow-based Norilsk Nickel, the world’s largest producer of nickel and palladium, said it expects to produce less palladium this year.

Wiktor Bielski, the London-based global head of commodities research at the Russian investment bank VTB Capital, predicts that global supply of palladium will fall short of demand by 500,000 to 600,000 ounces this year and by 800,000 ounces next year, Institutional Investor reported.

In South Africa, which is the largest producer of palladium, some mines may shut down due to low prices, while others have faced problems from labor strikes.

Oddly, the price of palladium is down - near its low, in fact. Hedge funds, Bielski, explained, have made out well by aggressively shorting the metal in the current uncertain investing environment, according to Institutional Investor.

Still, Bielski believes the time for shorting palladium is ending and expects the metal to rise. The more it is beaten down by shorting, the stronger and longer its recovery will be.

“You can’t fight the fundamentals forever,” he told Institutional Investor.

Rohit Savant, a senior commodity analyst at CPM Group, wrote in a Seeking Alpha column that he predicts demand for palladium will exceed supply for the next 10 years.

“Constrained mine supply from South Africa and increased use of the metal from the auto sector are expected to be the primary drivers of this long-term deficit in the palladium market,” Savant wrote.

South Africa mines face electricity and water shortages, safety stoppages and politically difficulties, he noted.

“Furthermore, tightening emissions standard and advancements in auto catalyst manufacturing technology,” he added, “is expected to boost demand for palladium use from this industry.”