Analysts see a “significant deficit” in palladium this year.

Palladium has fallen from its 2015 high in March of around $US832.65 an ounce to a low of $666.45/oz in June.

The precious metal fell by around 15% alone last month and was trading at $681.30/oz overnight.

ANZ is tipping at least a 10% rally in the next three months.

“Recent sharp moves in market positioning have decreased the risk of further downside, providing a good opportunity to buy spot palladium,” ANZ said.

“Current market positioning suggests a strong chance of a short-covering rally in the near future.”

According to ANZ, commercial market participants have significantly reduced the size of their hedge books, which is a good indicator of the bottom of the market.

The gross non-commercial short position is at a record high of 22% of open positions, from 7% in May.

ANZ is tipping non-commercial traders to need to cover their shorts once the price uptrend starts.

“We expect prices to recovery sharply when this occurs,” it said.

ANZ is tipping the price to rise to $775/oz in the next three months.