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What's Behind the Rally in Palladium ETF?

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The year 2019 has seen some exceptional performance by the palladium metal, which has gained attention from a large section of commodity investors. The auto-catalyst metaljust touched an all-time high of $1,700 per ounce on Sep 30. It has also risen more than 8% in the third quarter. In fact, Aberdeen Standard Physical Palladium Shares ETF (PALL - Free Report) has gained 30.4% year to date, outperforming the 2.7% gain of the Invesco DB Commodity Index Tracking Fund (DBC - Free Report) . 

Notably, analysts expect palladium prices to reach the $2000 per ounce mark in the next three months. For our investors, let’s take a sneak peek into what’s driving the upside (read: Precious Metal ETFs Gain From Tit-for-Tat Tariff Action).

Supply Crunch

The markets have been long grappling with a supply crunch of palladium. In fact, at the current level of supplies, market demand for the metal remains unmet. Moreover, analysts expect the palladium market to continue to witness supply shortages. In fact, the world’s largest producer of the auto-catalyst metal, Russia-based Norilsk Nickelis uncertain about its ability to resolve the supply issue. It is being largely speculated that Moscowis close to completely exhausting palladium inventory levels while some suppliers are withholding supplies as they are waiting for prices to soar.

Palladium& Industrial Usage

Palladium has been seeing a strong demand for its role in industrialproducts.  The metal is a major component in electric vehicle batteries. The demand for the metal is expected to keep on rising in the long term as emission standards are becoming more stringent. In fact, even before the implementation of the nationwide emissions standard in 2020, China is seeing a surge in demand for palladium.

Palladium as a Store of Wealth

The prices of precious metals like palladium rise when markets are in turmoil. Geopolitical tensions and a decline in the stock market are currently driving demand for palladium as a store of wealth. It is worth noting that the geo-political scenario is marked by escalating Sino-US trade tensions, Brexit uncertainty, slowing global growth and rising Middle East tensions (read: 3 Long/Short ETFs to Buy as Wall Street Takes a Hit).

Palladium ETF in Focus

PALL reflects the performance of the price of palladium, less Trust's expenses. The shares are designed for investors who want a cost-effective and convenient way to invest in physical palladium. PALL charges 60 basis points in fee per year and has AUM of $252.9 million (see all Precious Metals ETFs here).

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