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Palladium ETF Finds Favorable Catalysts


Even with a modest decline Monday, the ETFS Physical Palladium Shares (PALL) is up more than 3% in the past week.

Over the month leading up to Monday’s trading session, PALL, the lone U.S.-listed ETF solely backed by holdings of physical palladium, had surged 9%. That is a sign palladium futures and PALL are in the midst of the breakout that many market observers and traders had previously called for.[Palladium ETF Could Break Out]

Russia’s conflict with Ukraine is proving to be a positive catalyst for palladium.

“ Concerns that Russia may face trade restrictions or restrict exports following its invasion of the Ukraine helped boost the palladium price 4.0% last week. Any restrictions on Russian palladium exports would exacerbate what is already expected to be a large palladium deficit in 2014,” according to a research note by ETF Securities.

Russia is the world’s largest palladium producer, but the country does not release stockpiles data, prompting some market observers to speculate that the country’s inventories are all but gone.

Late last year, analysts forecast a palladium market deficit for 2014, citing robust global auto demand. The white metal is a key component in the production of catalytic converters in automobiles manufactured in China and the U.S., the world’s two biggest auto markets. [More Upside Awaits Palladium ETF]

Metals analysts also noted that any uptick in labor unrest in South Africa, the second-largest palladium producer, could push prices higher. That scenario has come to pass.

“In addition, talks aimed at ending the strike that has halted the South Africa platinum and palladium (PGM) industry for over 6 weeks collapsed last Wednesday. So far, the strikes have taken about 320,000 ounces of platinum off the market, equivalent to almost 6% of 2013 global production. The prices of platinum and palladium have started reacting to the prolonged strike as producers’ stocks are fast approaching depletion. We remain fundamentally bullish on platinum and palladium but recognize recent gains represent an attractive opportunity to book some profit for the more tactically orientated. Longer term, the PGMs remain attractive for portfolio diversification and price appreciation in a sector that appears to increasingly be suffering from a structural deficit,” said ETF Securities in the note.

The ETFS Physical Platinum Shares (PPLT) is up 6.8% in the past month.

ETFS Physical Palladium Shares

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.