Even with the end to labor unrest in South Africa, however temporary it may be, exchange traded funds backed by physical holdings of palladium and platinum have the potential to continue rising.
Prices of platinum group metals, including palladium, have surged in recent weeks even amid news labor strikes in South Africa were close to an end. The ETFS Physical Palladium Shares (NYSEArca: PALL) is up 3% in the past month while the ETFS Physical Platinum Shares (NYSEArca: PPLT) is higher by 5.1% over the same as platinum futures currently reside near 10-month highs. [Bullish Fundamentals for Palladium, Platinum ETFs]
“We believe investors are finally focusing on the fundamentals of platinum and palladium and believe that prices will continue to rise as the industry struggles to get back to full production. More structural changes are foreseen in the near future, with PGM prices likely to benefit from increased tightness,” said ETF Securities in a new research note.
South Africa is the world’s largest platinum produce and the second-largest palladium producer behind Russia, highlighting the role labor strife there and economic sanctions against Russia played in boosting palladium prices this year.
Although the South Africa strike appears to be resolved, it cannot be forgotten Africa’s second-largest economy has a history of labor unrest that adversely affects its mining output. Additionally, though the strikes are over, it is unlikely that new supply will come to market fast enough to erase another year of expected palladium deficits. [Platinum ETFs Survive Lost Strike Premium]
“We remain positive the fundamentals of platinum and palladium and believe that prices will continue to perform strongly in 2014. Large deficits are already expected in both markets this year and the recent pick up in global auto sales is likely to exacerbate the situation further. With combined auto sales in the US, China and Europe, the three biggest regions by consumption, up 6% in the first five months of 2014 on the previous year, the PGM market is looking increasingly tight,” said ETF Securities.
An unexpected rise in U.S. car sales is also supporting platinum and palladium – the precious metals are used in car-exhaust filters to diminish pollutants, with automobile use accounting for 38% of total platinum demand and 68% of palladium demand.
ETFS Physical Palladium Shares
ETF Trends editorial team contributed to this post.
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.