Several sources are now reporting an increasing supply deficit for palladium in 2017. According to a report by the Financial Times, “the palladium market is witnessing a rising deficit”. This would mark the sixth successive year of significant supply shortages in the palladium market, whereas its sibling platinum this year may be experiencing its first supply surplus in six years.
Best-performing precious metal year-to-date
The chart below shows the price of palladium in US Dollars over the last 12-month period. As you can see, this is a healthy trending market, trading above both the 50 and 100 day moving averages. It is exactly the type of market any trend following trader should be invested in.
Strong fundamental support
Palladium is an industrial metal primarily used as an important component in catalytic converters that reduce the amount of harmful air pollutants from cars. As we have spoken about before, some analysts believe that this will continue to drive the price of palladium higher, as China and other large developing countries are stepping up the fight against air pollution.
Platinum, on the other hand, is used in diesel-fueled cars, which are now experiencing a downturn mainly due to environmental concerns. As the trend of gasoline fuel being favored over diesel continues, the price of palladium is expected to continue to rise at the expense of platinum, and may soon surpass it, despite being known as a “lesser” metal.
Limited and vulnerable supply
Being far rarer than both gold and silver, palladium (and platinum, for that matter) is almost exclusively mined in only two countries; Russia and South Africa. In the case of South Africa, output of this precious metal is under pressure from political instability, labor strikes, high operating costs for miners, and infrastructure problems. The Russian production is relatively stable, but there are almost no new palladium mining operations being started, even as demand for the metal is continuing to grow.
How do I play the surge in palladium?
Probably the best way to play the palladium market is through the ETFS Physical Palladium Shares with the ticker code PALL. This ETF is backed by physical palladium bullion bars stored in its vaults in London and Zurich. ETF’s are in many cases a cheaper option for long-term investments in precious metals, when compared with physical ownership, and they can be traded through most online brokers.