Palladium (XPD) is on the rise again after easing lower in early trading on Friday, following a surge to a record high during the previous session, supported by supply concerns even as demand is set to take off on the back of global economic recovery. At the time of writing, palladium is trading at around $2981 per ounce.

Analysts expect the industrial metal to soar to $3,000 and possibly break above this level in the near-term, especially as the demand for green energy and reduced carbon emissions from automobiles powers the demand for electric vehicles, which use this metal extensively. Palladium is mostly used to manufacture catalytic converters in automobiles to ensure that vehicles produce lower levels of polluting emissions, in addition to being used to manufacture surgical and dental equipment.

While demand is expected to rise in the medium to long term, palladium finds support in the near-term owing to supply disruptions across South Africa and Russia – two key suppliers of the metal. Last month, the world’s largest producer of the industrial metal, Nornickel in Russia, announced a reduction in supply owing to mine closures as a result of flooding, boosting the rally in prices. This move by Nornickel is estimated to reduce palladium production by 15-20% this year even as mines in South Africa struggle to find investment to boost their capacity.

While the fundamentals support the rally in XPD/USD, breaking out past the $3,000 level can be especially challenging as several investors would have placed sell orders at this key level. This would increase selling pressure once the price touches this level, which could then cause a dip in prices before buyers step in confidently and take the price higher in the coming sessions.