Weak Supply Keeps Pushing The Palladium ETF Higher

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January 11, 2017 6:44am NYSE:PALL

Platinum & Palladium

From Zacks: Palladium has been outshining other precious metals in the last couple of months. Last month, the only pure-play on the metal – ETF Securities Physical Palladium Shares (PALLFree Report) – clearly outperformed the rest of the precious metal ETFs in the space.


Namely, PALL has beaten the gold ETF, SPDR Gold Trust (GLDFree Report) , platinum ETF, ETFS Physical Platinum Shares (PPLTFree Report) and silver ETF, ETFS Silver Trust (SIVRFree Report) . PALL was up 12.9% in the last three months (as of January 6, 2017). GLD, PPLT and SIVR were down 6.7%, up 0.2% and down 5.8%, respectively.

Precious metals had an amazing journey last year on a flight to safety amid global growth concerns as the Brexit vote and the U.S. presidential election led to volatility. Now that market conditions are witnessing a reversal, palladium is clearly emerging as a winner in the precious metals space, thanks to its industrial uses. This makes it a favorite with investors looking to play the recovering economy (read: 5 Top-Ranked Sector ETFs Thankful to Trump).

Palladium is mostly used in the automotive industry for manufacturing catalytic converters to clean exhaust emissions. Last year, U.S. new car and truck sales hit record levels. Strong consumer confidence and relatively low fuel prices lifted the industry’s outlook.

Meanwhile, President-elect Donald Trump plans to introduce a burst of stimulus with tax cuts and an infrastructure spending package. Speculation is rife that business investments will a get a new lifeline now. This could benefit automakers. In addition, tax cuts and higher government spending in the major car markets of China are also expected to boost auto sales (read: Is It Finally Time for China ETFs?).

Moreover, supply shortages are expected to continue this year. The palladium market is expected to post a deficit of 651,000 troy ounces this year and another shortfall in 2017. This is primarily due to rising autocatalyst demand.

In a nutshell, the global supply outlook appears fragile at the current level, making the metal an intriguing option for investors. Below we have highlighted the only pure-play on the metal – PALL – in detail (see all Precious Metals ETFs).

PALL in Focus

For a bullion-backed approach to palladium ETF investing, investors can look to ETF Securities Physical Palladium Shares or PALL. The ETF holds the metal in the form of bullion, or ingots. The metal is safely stored in London and Zürich on behalf of the custodian, JP Morgan Chase Bank.

Investing through PALL in palladium represents a cost-effective and suitable mode for investors. The transaction costs for buying and selling shares will be much lower than purchasing, storing and insuring physical palladium for most investors.

This ETF is designed to track the spot price of Palladium bullion and has amassed about $178.2 million in assets. The expense ratio of 60 basis points appears reasonable in the precious metals ETF space. The fund trades in paltry volumes of less than 38,000 shares on average daily basis.

The ETFS Physical Palladium Shares (NYSE:PALL) was unchanged in premarket trading Wednesday. Year-to-date, PALL has gained 12.53%, versus a 1.31% rise in the benchmark S&P 500 index during the same period.

PALL currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #1 of 29 ETFs in the Precious Metals ETFs category.


This article is brought to you courtesy of Zacks Research.


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