What’s Driving the Palladium ETF?
Tuesday, April 6th, 2010Michael Johnston submits:
When ETF Securities finally cleared the last of the regulatory hurdles last year and geared up to introduce the first physically-backed platinum and palladium ETFs, investor interest quickly surged. Although futures-based exposure to platinum had been available for several years, exposure to physical bullion prices represents an entirely different asset class–apparently one that investors were eager to access. As the buzz around these funds intensified, it became clear that commodity investors have embraced ETFs as a powerful innovation.
When the ETFS Physical Palladium Shares (PALL) and Physical Platinum Shares (PPLT) hit the market in early January, investors, this anticipation translated into one of the most successful product launches in recent memory. PALL finished the first quarter of the year with almost $270 million in assets, while PPLT topped $500 million. Strong interest in a fund obviously doesn’t guarantee strong performance (UNG’s run during 2009 illustrates this concept very well), but PALL and PPLT have turned in very strong year-to-date performances; recently the palladium ETF was up almost 18% since inception while its platinum counterpart had added about 7%. Both metals have raced ahead of gold, reminding investors that there is more to precious metals than GLD and SLV. The ratio of gold prices to platinum and palladium prices recently hit its lowest level since before the Lehman Brothers bankruptcy, as an ounce of gold bought about 2.2 ounces of palladium, down from a high above 5.0 ounces in February 2009.
