Palladium ETF Rises Near One-Year High on Supply Concerns

January 2nd at 1:45pm by Tom Lydon

The palladium exchange traded fund continues to see strong interest as investors try to capitalize on the largest supply deficit in over a decade.

ETFS Physical Palladium Shares (NYSEArca: PALL) is up more than 10% the past three months to within shouting distance of its 52-week high from early 2012.

Last month, Johnson Matthey calculated that palladium will hit its worst deficit in 11 years. [Palladium ETF Bolstered on Largest Shortage in a Decade]

“Funds have been after palladium ever since that JM report came out,” Frank McGhee, head precious metals at Integrated Broking Services in Chicago, said in a Reuters article.

Palladium futures were trading around $709 an ounce on Wednesday.

Palladium is used in automobiles for autocatalysts to convert emissions into less harmful substances.

On the demand side, Scotiabank expects global auto sales to rise 4% in 2013 after average growth rates of 7% over the past three years, according to The StarPhoenix.

“Global sales will be bolstered by strong employment growth in developing nations, record low interest rates and the recent acceleration in the pace of monetary expansion around the globe,” Carlos Gomes, Scotiabank senior economist and auto industry specialist, said in the Reuters article.

Toyota Motor also announced that it will experience 9.9 million in global auto sales in 2013, or up 2% from the 2012 figures, according to the Global Times.

Recently, Sprott Asset Management launched the Sprott’s Physical Platinum and Palladium Trust (NYSEArca: SPPP), which saw nearly 6 million shares traded on its first day, writes Chris Hempstead, Head of ETF Execution at WallachBeth Capital.

SPPP holds physical palladium stored in London and Zurich. Potential investors should be aware that the investment is a closed-end fund – as a CEF, the fund can trade at a premium or discount to its NAV over prolonged periods since the number of outstanding shares does not change, whereas ETFs will try to stick close to their NAVs through creation/redemption process. [Premiums & Discounts]

For more information on palladium, visit our palladium category.

Max Chen contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

Tickers

PALL