Precious metals investors may take a shine toward the palladium exchange traded fund as strong fundamentals bolster the white metal.

“We believe the palladium price has the potential to perform strongly over the next few months on a combination of price supportive supply and demand fundamentals,” ETF Securities’ Simona Gambarini, Associate Director of Research, and Nicholas Brooks, Head of Research and Investment Strategy, said in a research note.

The palladium market is expected to experience a large deficit this year, with demand outpacing supply by at last 850,000 ounces, or 10% of global supply.

On the supply side, palladium mine supply has been declining by an annual rate of 2% since 2007. Russia and South Africa, the two main producers of palladium, are extracting lower ore grades as well. Additionally, Russian government stockpiles are depleted after years of liquidating stocks. [Supply Shortages Could Boost Palladium, Platinum ETFs]

On the demand side, automobile sales are expected to rev up in China and the U.S., the two largest auto markets in the world. Combined, auto sales in both countries gained 14% in the first nine months of the year, and analysts anticipate car sales rise.

Palladium is a major component in auto catalytic converters that help remove toxic byproducts from combustible engines. Over 65% of total platinum demand comes from the auto industry, particularly in the world’s two largest vehicle markets: China and the U.S.