Palladium, a cheaper cousin of platinum may shine the brightest
among all precious metals this year.
Platinum and palladium are the best known among the six platinum
group metals (PGMs). The other four are produced only as the
co-products of platinum and palladium. (Read:
Time to Invest in Platinum ETFs?
Demand for PGMs comes mainly from autocatalysts used to decrease
harmful emissions in vehicles. Autocatalysts comprise 55% of
the total demand, while electronics, dentistry and chemicals
together account for about 25%.
Although palladium is used worldwide, most of the physical metal
is stored and most OTC trades are cleared through Zurich. Given its
industrialapplications, the price of the metal is mainly determined
by the economic trends.
At the height of the global financial crisis, palladium prices
fell from a high of $558 per ounce in March 2008 to a low of $184
per ounce in December 2008, as the industrial demand for the metal
Last year the average prices rose sharply to $730 per ounce, up
from $531 in 2010, since the demand for the automobiles grew,
particularly in emerging economies.
Palladium is produced mainly in Russia (Norilsk region) and
South Africa; during 2011, 41% of the global supply came from
Russia while 38% came from South Africa.
Mine production in South Africa has been going down due to
worker strikes, safety related stoppages and rising production
costs. Supplies from Russia are also expected to be down in the
coming years due to diminished stockpiles. (Read:
Silver ETFs Outshine Gold
On the other hand, the demand for the metal is on the rise as
the global automakers are increasing their production. Further,
auto manufacturers are substituting palladium for more expensive
platinum in catalytic converters. According to
US Geological survey,
as much as 25% palladium can routinely be substituted in diesel
catalytic converters; while in some applications, the substitution
can be as much as 50%.
Given the supply-demand situation, the prices are expected to
shoot up this year. According to the
median estimate of 11 analysts surveyed by
, the metal will average $850 an ounce in the third quarter of
2012, up 32% from the current price of about $640 per
ounce. The survey projects 15% gain for gold, 13% for silver
and 11% for platinum. (Read:
Gold ETFs May Continue to Shine in 2012
ETFS Physical Palladium Shares (
PALL, the only physically backed exchange traded product for
palladium presents a cost-effective, convenient and secure way of
investing in palladium. The ETF introduced in January 2010,
currently has $507 million in assets under management. The fund
charges 0.60% annually to the clients for operating expenses, which
is slightly above the category average of 0.55%.
The shares seek to track the performance of the price of
palladium bullion, less trust's expenses.BNY Mellon is the trustee
while JPM Morgan Chase is the custodian. The trust holds physical
palladium bullion in London and Zurich. The custodian maintains a
list of uniquely identifiable palladium ingots and plates, which is
updated and published daily on the website. Additionally biannual
vault inspections are conducted by a bullion assaying firm.
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