Some precious metals and the relevant exchange traded funds struggled in November.
Don’t tell that to palladium and the ETFS Physical Palladium Shares (NYSEArca: PALL). PALL, the lone dedicated physical palladium ETF available to U.S. investors, surged more than 23% last month.
Palladium has been rallying over recent months due to improving car sales and signs of strength in the U.S. economy.
Earlier this year, palladium also found support from the ongoing surge in the precious metals group, led by gold, as global central banks cut interest rates and implemented more aggressive accommadative measures to stimulate growth – low borrowing costs help support precious metals since the hard assets don’t offer yields while depressing the U.S. dollar, in which the metals are priced.
The sensitivity of commodities to changes in the U.S. dollar makes PALL’s November surge all the more impressive. Consider this: As was noted above, palladium is denominated in U.S. dollars and the greenback has been on a tear since Election Day. The U.S. Dollar Index gained nearly 3% in November.
ETFS Physical Palladium Shares
“Investor sentiment in palladium has reversed in November with net positioning in palladium futures contracts up 55% in the first two weeks of the month (as of Nov 15th) as investors have reduced short positions,” said ETF Securities in a note posted by Teresa Rivas of Barron’s.
Platinum and palladium will also benefit from positive spill overs from gold and silver in an extended negative real rate and range bound dollar environment. The improving global economy and stronger car demand, especially among European and Chinese consumers, will also drive industrial demand.
“NYMEX palladium inventories have been reduced 18% in November suggesting tightness in the current market supply – this may explain the recent rise in palladium which has jumped 19.5% so far in November to $742 (as of Nov 22nd),” according to the ETF Securities note featured in Barron’s. “Demand outlook for palladium remains strong along with other industrial commodities and strong Chinese auto sales continue (up 21% year over year as of October 31st).”
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