U.S. Markets closed

Supply Shortages Could Boost Palladium, Platinum ETFs


Year-to-date, the ETFS Physical Platinum Shares (PPLT) , the lone U.S.-listed ETF backed solely by physical holdings of the white metal, is down 7.3%. That sounds bad, but when measured against the largest gold ETF (down almost 21%) and the largest silver ETF (down nearly 26%), PPLT looks pretty good.

Things could get even better for PPLT and the ETFS Physical Palladium Shares (PALL) . PALL is the best-performing physically backed precious metals ETF with a year-to-date gain of 5.1%. Predictably, the catalyst forcing both platinum and palladium, the less expensive of the two metals, into extended supply shortages is robust global oil demand. [Global Auto Demand to Lift Palladium ETFs]

Both metals will be in a shortage for the longest stretch since 2005 for platinum and 2000 for palladium, Bloomberg reported, citing data from Barclays and Johnson Matthey.

Palladium demand will exceed output by 1.33 million ounces in 2013. Adding to the bullish outlook for palladium futures and PALL is speculation that sales from Russia, the world’s largest producer of the metal, are expected to fall. Russia does not reveal exactly how large its palladium reserves are, but some market observers have theorized the country’s output has been declining for several years. [Palladium ETF Soars]

South Africa is the world’s largest platinum producer and the second-largest palladium producer. Bolstering the case for both white metals is this: Growth in car sales is projected to accelerate to 4.8 percent in 2014 from 2.7 percent this year, Bloomberg reported. The metals are essential in the production of catalytic converters.

China vehicle sales surged 20% to an eight month high in September and continued strength of China’s economy should be positive for both palladium and platinum prices, with palladium benefiting from strong auto sales and platinum from robust China jewelery sales, said ETF Securities earlier this month. The ETF issuer added that since 2009 China’s platinum jewellery consumption has been bigger than all platinum consumed by Europe’s auto industry.

ETFS Physical Platinum 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.