Palladium ETFs: 2013 Outlook
January 15th at 3:15pm by Tom Lydon
2012 was a weak year in the palladium market due to lowered industrial demand. This year, the metal is expected to gain value. A focused ETF is a preferred method to gain exposure to this commodity.
“The limited supply has led to higher prices for the commodity, especially given the increased demand from the auto industry. Looking ahead, many analysts see 2013’s average prices that are steadily to sharply higher than they were in December 2012, particularly during the second half of 2013 when the global economy is expected to gain momentum,” Justin Kuepper wrote for Commodity HQ. [Palladium ETF Rises Near One Year High on Supply Concerns]
The ETF Securities Physical Palladium Shares (NYSEArca: PALL) is backed by the physical metal, which is stored in London at JP Morgan Chase vaults. The ETF has about $500 million in assets and costs about 0.60%. Spot prices for palladium are at the highest level since October, at $700.75, reports Reuters. [Industrial Demand, Auto Sales Can Drive Palladium ETF]
Last year the palladium market suffered from weak demand within the auto industry and slow jewelry sales. Analysts are bullish on the metal this year for a number of reasons.
Demand for the metal is expected to pick up in 2013, due to increased auto sales. Palladium is used in the catalytic converter production process and plays a key role in cleaning auto engines. Globally, auto demand is set to pick up about 6% from last year, higher than the 4% rise seen in 2011. [ETF Performance Report: November]
Also, consumption of palladium in cell phones and computers and jewelry should further provide a boost to the demand for the metal, reports Zacks.
A supply deficit is also on the horizon as a labor dispute has been ongoing in South African mines. Production cuts have been made and many palladium mines have become unprofitable in the region. Furthermore, stockpiles in Russia are dwindling leading to the possibility of a palladium shortage not seen since 2000.
Tisha Guerrero 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.