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Institutional Investors Take an Interest in Palladium ETF


Palladium exchange traded funds are shining as pent up industrial demand, coupled with supply concerns, stoke institutional interest.

The ETFS Physical Palladium Shares (PALL) is among the top ETF performers lately.

Palladium hit a 19-month high on weakness in supply and the expanding auto industry, outperforming other precious metals, Reuters reports. [A Roller-Coaster Ride For Precious Metals ETFs]

Palladium currently trades at around $775 per ounce. [Palladium ETFs Pull Inflows; Bullish Futures Positioning Hits Record]

The white metal is used in auto catalytic converters to clean exhaust fumes, specifically for gasoline engines. Autocatalyst demand accounted for about 65% of palladium demand in 2012, according to Barclays PLC.

“We did see light short-covering and fresh hedge-fund buying coming back in as the payrolls number was being reassessed as one that’s not enough to change the Fed’s policy,” James Steel, metals analyst at HSBC, said in the article.

Meanwhile, palladium backed exchange traded products, which include both ETPs and exchange traded notes, experienced their largest monthly inflow in a year over February, adding 127,855 ounces of palladium, compared to their monthly average of 41,693 ounces, reports Jan Harvey in a separate Reuters article. In contrast, gold ETFs saw their largest recorded outflows over February. [Gold ETF Sees Over $5 Billion Outflow as Prices Slump]

“I think it is part of the broader rotation by investors into more cyclically geared assets that started late last year as investors become more confident about the global macro outlook,” ETF Securities’ head of research Nicholas Brooks said in the article.

Analyst anticipate large supply deficits from Russia and South Africa while China and the U.S. will see greater auto demand.

“We are forecasting sustained deficits in the palladium market to the end of the decade of (around) 350,000 ounces per annum, which we expect will place upward pressure on prices over the medium term,” Deutsche Bank said in a note.

ETFS Physical Palladium Shares

For more information on palladium, visit our palladium category.

Max Chen contributed to this article.

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.