Continuing an ascent that started last year, the Aberdeen Standard Phys PalladiumShrs ETF (NYSEArca: PALL) is surging again in 2019. The largest palladium exchange traded fund listed in the U.S. appears to have broken out on a technical basis on Thursday, surging more than 3% in early trading.
Supporting the recent price surge in the palladium market, traders grew wary of potential supply concerns out of Russia in response to President Donald Trump’s plans to pull out of a nuclear treaty with Moscow. Trump said late last year that Washington will step away from an intermediate-range Nuclear Forces Treaty with Russia, claiming that Moscow has been violating the treaty.
“The precious metal, primarily used in the auto industry for catalytic converters, has surged more than 65 percent since the middle of August,” reports Bloomberg. “The bull run has been driven by an acute shortage of immediate supply as car manufacturers scramble to get ahold of the metal to meet more stringent emission controls.”
Trade talks between the U.S. and China are also seen as pivotal to palladium’s fortunes. Consequently, with trade war speculations easing between Beijing and Washington D.C., the outlook on U.S. car sales to this Asian emerging market is improving, along with the potential demand for palladium used for catalytic converters.
Palladium Investing Catalysts
A major catalyst for palladium’s run dating back to last year has been expectations for supply deficits.
“The metal will remain in a supply deficit for an eighth straight year, according to Metals Focus Ltd. Palladium’s status as a byproduct of mines in South Africa and Russia means output levels aren’t adjustable to meet short-term demand, despite the surging price,” according to Bloomberg.
Russia and South Africa are the two largest producers of palladium.
After surging through $1,400 an ounce on Wednesday, palladium could flirt with $1,600 an ounce on the upside, according to some technical analysts.
For more information on the palladium markets, visit our palladium category.