The Aberdeen Standard Physical PalladiumShares ETF (NYSEArca: PALL) is easily one of this year’s best-performing precious metals ETFs as highlighted by a gain of 54%. Palladium has traded higher for 16 consecutive days and PALL is up 14.56% this month.
PALL seeks to reflect the performance of the price of physical palladium, less the expenses of the Trust’s operations.
“Prices climbed for an unprecedented 16th day after signs of a breakthrough in the U.S.-China trade talks, fueling hopes for a rebound in the auto industry, palladium’s biggest consumer,” reports Bloomberg. “The metal that reached another record surged this week as mining disruptions in major producer South Africa threatened to tighten a market already hobbled by a persistent deficit.”
Unlike 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.
“The metal has gained more than 50% this year even as global car sales remain weak. Citigroup Inc. forecast prices could hit $2,500 next year,” according to Bloomberg. “Tight supplies, which have trailed demand since at least 2012, mean that autocatalyst makers are scrambling to get hold of the metal to meet stricter pollution rules.”
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.
“South Africa, the world’s No. 2 palladium producer, expanded rolling blackouts to a record level earlier this week, disrupting miners’ operations. The situation has eased and most operations have returned to normal, although the country continues to experience power cuts,” according to Bloomberg.
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.