Exchange traded funds backed by physical holdings of palladium continue to gain favor with investors amid the crisis in Ukraine and ongoing labor strife in South Africa.
“Russia is the world’s biggest producer of palladium, with 42% of supply coming from the country. Any restrictions on Russian palladium exports would exacerbate what is already expected to be a large palladium deficit in 2014,” said ETF Securities in a new research note.
The ETFS Physical Palladium Shares (NYSEArca: PALL) surged 7.1% from Feb. 21 through March 21, a time frame in which the comparable gold and platinum ETFs trading only modestly higher. Over the same time, major physically-backed silver ETFs dipped nearly 7%. [Favorable Catalysts for Palladium ETFs]
“At the same time, South African strikes are entering their 9th week and no industry-wide resolution has been found yet. While Amplats signed an agreement with the National Union of Metalworkers of South Africa (NUMSA) on Thursday, the Association of Mineworkers and Construction Union (AMCU), by far the largest union at Amplats’ operations, is still on strike. South Africa is the 2nd biggest producer of palladium with 37% of global production and the largest producer of platinum,” according to ETF Securities.
In addition to news out of Russia and the labor strikes in South Africa, palladium prices were also boosted last Wednesday after Standard Bank of South Africa stated that it was launching a palladium-backed ETF on the Johannesburg Stock Exchange. On Thursday, Absa Bank, the company behind the world’s largest platinum-backed ETF, announced it will also launch the JSE-listed palladium ETF, NewPalladium, on March 27. [Absa Capital to Launch South-Africa-Listed Palladium ETF]
Commerzbank calculates that palladium ETFs currently hold 2.1 million ounces of the precious metal, or about four months of global mining production.
ETFS Physical Palladium Shares
ETF Trends editorial team contributed to this post.