The Aberdeen Standard Physical PalladiumShares ETF (NYSEArca: PALL) traded lower Tuesday, a rare decline for what has been one of this year’s hottest commodities ETFs. With palladium residing the unprecedented price point of $2,000 per ounce, some market observers believe more upside could be in the offing.
PALL seeks to reflect the performance of the price of physical palladium, less the expenses of the Trust’s operations.
“Palladium has gained 57% this year, with market watchers saying the shortfall will be hard to fill. That’s great news for producers of the metal, used mainly in autocatalysts, which have seen their shares surge,” reports Bloomberg.
Unlike platinum, the other white metal platinum, which as part of catalytic converters for diesel engines, palladium has benefited from a positive demand outlook that analysts expect to persist as governments around the world aim to meet rising environmental conservation goals.
PALL: Almost Perfect
For its part, PALL is up 13.46% just this month and resides just 2.26 below record highs.
“Palladium has surged to unprecedented levels in 2019 as tighter emissions rules spurred demand, while supply hasn’t yet been able to respond. Citigroup Inc. forecasts the move upward now has the potential to see prices gain to $2,500 in the first half of next year. Power outages in major producer South Africa hurt mine operations this month, fueling gains,” according to Bloomberg.
With a lack of new supply coming to market, palladium prices could push even higher, benefiting PALL along the way.
Moreover, the return to lower interest rates around the world has continued to support demand for physical assets, which tend to exhibit an inverse relationship to interest rates since investors are less apt to hold non-yield-generating raw materials when bonds offer higher yields in a rising rate environment.
However, the palladium market is not without its risks. Despite the recent strength, some analysts have warned of a swift turn, underscoring palladium’s tendency for outsize swings when sentiment changes or a reversal in other precious metals like platinum and gold that could drag down the broader precious metals group.
For more information on the palladium markets, visit our palladium category.
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.