The Palladium metals-related ETF has hit a record high, with the palladium spot prices breaking above $1,400 for the first time ever, as industrial demand outstripped supply in the market.
The Aberdeen Standard Physical Palladium Shares ETF (NYSEArca: PALL) gained 3.5% Thursday and increased 22.2% over the past year. The spot palladium was up 2.1% to $1,394.4 and was trading as high as $1,439 earlier in the day.
“The palladium market is laboring under production-consumption deficits,” James Steel, chief precious metals analyst at HSBC, told Reuters.
Steel pointed to policy initiatives out of China, the biggest auto market, that are supportive of palladium’s demand outlook.
According to Metals Focus Ltd, the precious metal will remain in a supply deficit for an eighth consecutive year, Bloomberg reports.
Since touching a low in mid-August, palladium prices have surged 70%. Unlike gold, the precious metal has strengthened on the improved auto-industry demand outlook – palladium is mainly used in emissions-reducing catalysts or autocatalysts for vehicles.
Investors are also brushing off signs of potential automotive weakness in key markets like Europe and China.
“Investors appear to be ignoring the fact that weak sales figures have been reported for all major auto markets in recent days,” Commerzbank analysts including Daniel Briesemann said in a note. “Instead, they are seeing news such as the planned widening of a strike to include the platinum mines of a major South African gold and platinum producer as being a good reason to buy.”
“We are seeing steady buying in modest amounts; just no supply and no one willing to sell because you don’t know where it will stop,” Tai Wong, head of base and precious metals derivatives trading at BMO, told Reuters.
There is so little supply floating in the markets that some are turning to physically backed ETFs as a potential source. Holdings in palladium ETFs have almost halved from January last year as prices increased.
“There is not sufficient supply in the market, so people are purchasing metals from the ETFs,” Samson Li, a precious metals analyst at Refinitiv GFMS, told Reuters.
For more information on the palladium markets, visit our palladium category.