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Palladium ETF Rallies, Tests Record Highs

This article was originally published on ETFTrends.com.

Palladium and related ETFs climbed Monday, pushing toward their record levels last seen since January as supply concerns helped prop up the white metal.

The ETFS Physical Palladium Shares (PALL) rose 3.4% Monday, with the palladium spot price up 3.4% to around $1,120 per ounce.

R. Michael Jones, chief executive officer of Platinum Group Metals Ltd., argued that palladium, which is widely used in catalytic converters to reduce pollution emissions for gasoline-powered automobiles, has reached an "important glass ceiling" on the charts, MarketWatch reports.

“The factors for palladium’s rise are all still in place—growing car sales around the world, popular small gasoline engines with palladium catalysts, big American [sport-utility vehicles] on gas with palladium, and South African platinum mine closures in the works cutting palladium production despite the good price,” Jones told MarketWatch, adding that platinum is the main metal at the South African platinum mines, while palladium is a by-product.

Supporting the recent price surge in the palladium market, traders grew wary of potential supply concerns out of Russia in response to President Donald Trump's plans to pull out of a nuclear treaty with Moscow. Trump said Saturday that Washington will step away from an intermediate-range Nuclear Forces Treaty with Russia, claiming that Moscow has been violating the treaty.

“The Russia dispute on nuclear arms raises a new wild card—sanctions on Russia could lock out 40% of the world palladium supply from the large mining complex at Norilsk [Nickel],” Jones said. “Regardless of potential for cooling of tensions with Russia[‘s] Norilsk, the largest producer of palladium in the world shows a major shortfall in palladium supply for the world in 2019 in their corporate presentation.”

Citigroup Inc. analysts including Max Layton said in a note that production will fall behind consumption by 481,000 ounces this year and deficits will persist through 2020, resulting in the "tightest" market in two decades, Bloomberg reports.

For more information on the palladium markets, visit our palladium category.

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