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Palladium ETFs Shine in Precious Metals Market

This article was originally published on ETFTrends.com.

While gold has been stuck in the doldrums, palladium and related exchange traded fund have been rallying since the August lows, recently breaking back above their long-term trend lines.

The ETFS Physical Palladium Shares (PALL) rose 0.8% Monday and increased 14.9% over the past month, with the palladium spot price now hovering around $1,061 per ounce, its highest level in almost seven months. In comparison, the SPDR Gold Shares (NYSEArca: GLD) was only up 0.4% over the same period.

Palladium, which is used in automobile catalytic converters that diminish toxic emissions, surged 25% since mid-August on the softer-than-expected tariffs from China and the U.S., along with speculation that the Trump administration wants to compromise on trade, the Wall Street Journal reports.

While palladium is a precious metal, the commodity is also highly sought after for its industrial purposes, notably in the automobile industry. Many observers look to palladium as an indicator for care demand and sentiment due to its use in catalytic converters.

Palladium is “a small market, but sometimes these small markets can lead in terms of sentiment,” Tai Wong, head of metals trading at BMO Capital Markets, told the WSJ.

Shifting Moods in Palladium Market

In recent weeks, some analysts appear much more optimistic that the risk of a full-blown trade war and slowdown in China won’t materialize. Consequently, the market observers argued that Chinese consumers could continue to sustain its large appetite for automobiles, which would lead to higher palladium demand.

“The mood certainly has shifted,” Wong added.

New emissions standards in China for cars become effective in 2020 and will “increase the amount of palladium needed in every car,” R. Michael Jones, chief executive officer of Platinum Group Metals Ltd., told MarketWatch.

China may even be trying to secure palladium reserves in case of a worst case scenario between the U.S.

“We continue to think that China is strategically buying forward or is attempting to secure supply before even more adverse tariffs are in position,” analysts at Zaner Precious Metals wrote in a recent note.

A surge in new car registrations across the European Union over July and August bolstered palladium prices, according to Commerzbank analysts. The sudden demand for gasoline-powered automobiles, which require palladium catalytic converters, may be seen as a shift away from diesel-fueled vehicles following the Volkswagen scandal in 2015.

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