Among physically-backed precious metals exchange traded funds, palladium funds have dominated in terms of performance this year.
That assertion is confirmed by a 17.5% year-to-date gain for the ETFS Physical Palladium Shares (PALL) . PALL has rallied on the back of economic sanctions against Russia and labor strife in South Africa. Russia and South Africa are the two largest producers of the white metal used in the production of catalytic converters in American and Chinese manufactured automobiles. [Platinum Group ETFs Can Continue to Shine]
The big run for palladium has left pricier platinum with some catching up to do. The ETFS Physical Platinum Shares (PPLT) is up just 4% this year.
“The platinum to palladium ratio has dropped to its the lowest level since 2002, despite a South African strike that took over 1moz of platinum off the market. While the palladium price has been in a better position to benefit from a pick-up in China and US economic growth given its heavy use in the gasoline autocatalysts that dominate their auto markets, as the global recovery broadens to include Europe, we believe platinum (used heavily in diesel autocatalysts and Chinese jewelry) will start to see more demand traction,” said ETF Securities in a new research note.
Although palladium futures have been buoyed by the aforementioned labor problems in South Africa, that impact has been far less palpable for platinum and PPLT, a vexing scenario considering that South Africa’s is the world’s largest platinum producer. [Fundamentals Look Good for Platinum ETFs]
Fundamentals remain supportive of more upside for platinum, including a familiar catalyst: Improving emerging markets demand.
“While equities looked shaky last week, investors have been building their emerging market exposures as sentiment toward the Chinese economic outlook has improved. While lingering geopolitical risk has hampered investor sentiment within developed markets, there has been continued evidence that Chinese stimulus measures are taking hold. Within commodities, palladium has the largest exposures to the accelerating Chinese economy, and has significantly outperformed other metals in the sector, gaining nearly 25%. While most of the information may have been priced into palladium given its strong gains this year, we believe the laggard platinum price has strong potential to catch-up if global growth indicators continue given the tightening of supply conditions following the South African mining labour strikes,” added ETF Securities.
ETFS Physical Platinum Shares ETF
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.