While gold has taken a blow in response to the diminished demand for safe-haven assets, palladium and related exchange traded fund have outperformed.
The ETFS Physical Palladium Shares (NYSEArca: PALL) rose 9.1% over the past week and gained 37.0% over the past year, with the palladium spot price now hovering around $757.0 per ounce, compared to
“Palladium is up more than all the other metals this week and was the top performer last year,”Maxwell Gold, Director of Investment Strategy at ETF Securities, told ETF Trends in a call.
Gold also believed that palladium could continue to shine as tightening market conditions will continue through 2018. Traders have increased positioning in future market as automobile sales hit record highs, especially with rising automobile sales in China.
Along with its safe-haven link in the precious metals space, palladium is also more sensitive to economic cycles and enjoys heavy industrial demand, notably out of the automobile industry where the precious metal is used as an autocatalyst to remove harmful emission particles.
Moreover, demand for autos, along with palladium, could continue to rise if tax cuts and higher government spending in the major car markets of China and the U.S. boost auto sales, reports Jan Harvey for Reuters.
“(The) main driver for the solid performance is that palladium has the best fundamentals within precious metals,” Giovanni Staunovo, commodities analyst with UBS Wealth Management, told Reuters. “With supply stalling and demand rising, driven by strong car sales in the U.S. and China, 2017 is likely to be the sixth consecutive deficit year.”
President-elect Donald Trump has promised lower taxes and increase spending, which could further propel consumer demand for automobiles and support higher palladium prices.
“Although a few months ago we were conscious that sales may be topping out, the incoming Trump administration may change that,” Mitsubishi analyst Jonathan Butler told the Reuters Global Gold Forum. “The president-elect’s plans for tax cuts and fiscal stimulus should improve consumer confidence and may increase consumer spending on big-ticket items such as cars.”
For more information on the palladium market, visit our palladium category.