As is usually the case when discussing precious metals, gold and the related exchange traded funds are dominating the conversation this year. The SPDR Gold Shares (NYSE: GLD), the world's largest gold-backed ETF, is up 10.38% year to date and resides just below its recently set 52-week high.
While gold and the related ETFs are deserving of the accolades, the real winners in the precious metals space this year are palladium and the Aberdeen Standard Physical Palladium Shares ETF (NYSE: PALL).
PALL, the largest U.S.-listed palladium ETF, is up more than 26% this year, or more than double the gains offered by rival gold funds.
Why It's Important
“But gold has not been the shiniest precious metal this year; back in January, palladium became the most expensive precious metal for the first time since 2002, and by July 8, 2019, it had reached USD 1,542 per troy ounce, a premium of almost USD 150 to gold,” said S&P Dow Jones Indices in a recent research note.
Palladium's dominance is important for other reasons, including the fact that is not usually viewed as safe-haven asset as is the case with gold. Rather, palladium is one of the more volatile metals, due in large part to the global automobile industry being one of the metal's primary sources of demand.
“Approximately 80% of palladium demand comes from the automotive industry,” said S&P Dow Jones. “Its other uses include electronics, dentistry, and jewelry. As regulations on emissions have tightened, demand for palladium to be used in the catalytic converters of gasoline-powered vehicles has risen.”
While automobile demand is integral to the palladium demand equation, investors considering PALL should also examine the production situations in Russia and South Africa, the dominant players in the global palladium market.
“Palladium prices spiked in March 2019 when Russia’s Ministry of Industry and Trade announced it was considering a temporary ban on the export of precious metal scrap and tailings, while in South Africa, the world’s largest platinum miners are about to embark on a series of wage negotiations with unions, which in the past have led to lengthy mine strikes,” according to S&P Dow Jones.
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