There is the potential for gold prices and the relevant exchange traded funds to rally in the medium term if regime change in India prompts a curbing of that country’s import tariff on the yellow metal.
Investors not willing to make that bet have other options in the precious metals complex, including some metals that have their own batch of favorable catalysts.
The ETFS Physical Platinum Shares (PPLT) and the ETFS Physical Palladium Shares (PALL) , up 3% and 10.9%, respectively, over the past three months, are the top performers among physically-backed precious metals ETFs over that time and lingering catalysts could further lift these ETFs. [More Upside for Palladium ETFs]
“ Large deficits are already expected in both markets in 2014 and recent supply disruptions are further exacerbating the situation. As of end of April 2014, Thomson Reuters GFMS expected both platinum and palladium to be in a substantial physical deficit, equal to 0.7moz and1.3moz respectively,” said ETF Securities in a new research note.
In particular, palladium and PALL have been buoyed by geopolitical concerns. With the palladium market already tight and running in deficit, further economic sanctions against Russia that restrict exports from the world’s largest producer of the metal would likely lead to higher prices.
“South Africa is the world biggest producer of platinum and the second largest producer of palladium, with 72% and 37% of global mine supply coming from the country. Strikes in South Africa have entered their 17 th week, eating into inventory that major global producers had kept aside for such events,” said ETF Securities.
Despite the labor strife, the iShares MSCI South Africa ETF (EZA) has surged 15.1% over the past 90 days, but that does not mean lost platinum and palladium will not harm the South Africa ETF.
Last week, Moody’s Investors Service warned that ongoing labor strikes could hamper exports while negating the benefits of the weaker rand. The mining industry accounts for 60% of export earnings in South Africa. [Labor Strikes Could Weigh on South Africa ETF]
“While we expect palladium to outperform platinum this year, we believe supply disruptions coupled with stronger demand will bring the platinum price back to the levels last seen in April 2013,” said ETF Securities.
Chart Courtesy: ETF Securities
ETF Trends editorial team contributed to this post.
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.