With two new physically backed palladium exchange traded funds on the way, palladium prices spiked to $800 Friday as traders anticipate increased demand for the metal on top of supply concerns out of South Africa and Russia, the two largest producers.
Palladium prices touched $800 per ounce in morning trading but leveled off around $789 per ounce in midday action. The ETFS Physical Palladium Shares (PALL) was up 2.3% Friday. PALL has gained 7.9% year-to-date.
A North American PGM trader attributed the 2.6% surge in Palladium prices Friday during tepid action in the overall metals commodity market to the “three-headed monster,” pointing to the two-month old South African strike, trade sanctions against Russia and new demand needed to accommodate two new palladium ETFs, Kitco News reports. [Palladium ETF Finds Favorable Catalysts]
Moreover, Interfax news agency stated that Russian palladium production declined 30% in February month-over-month.
On Wednesday, Standard Bank of South Africa stated that it was launching a palladium-backed ETF on the Johannesburg Stock Exchange. On Thursday, Absa Bank, the company behind the world’s largest platinum-backed ETF, announced it will also launch the JSE-listed palladium ETF, NewPalladium, on March 27. [Absa Capital to Launch South-Africa-Listed Palladium ETF]
Physically backed precious metals ETFs acquire and store the metal in a vault, essentially removing a portion of the world’s supply from circulation.
“If the palladium ETF follows the same course as Absa Capital’s platinum ETF, which was launched at the end of April 2013, a great deal of supply could be stripped from the market, thereby contributing to a noticeable increase in the price of palladium,” Commerzbank said in a research note. “Within just four months of its launch, Absa Capital’s platinum ETF became the world’s biggest platinum ETF and now has a market share of 37%, with almost 945,000 ounces.”
Commerzbank calculates that palladium ETFs currently hold 2.1 million ounces of the precious metal, or about four months of global mining production.
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.