Fundamentals Support Platinum, Palladium ETFs

July 2, 2014

London (July 2)  The ongoing volatility in South Africa and improved car sales are bolstering exchange traded funds that track platinum group metals, with platinum moving toward a 10-month high and palladium touching a two-week high.

The ETFS Physical Palladium Shares (NYSEArca: PALL) was up 1.2% Tuesday, while the ETFS Physical Platinum Shares (NYSEArca: PPLT) was 1.5% higher. Year-to-date, PALL increased 18.1% and PPLT gained 8.0%.

Platinum prices were hovering around $1,509 per ounce and palladium prices were at $853 per ounce. [Palladium ETF Firms Despite Lost Strike Premium]

Prices on the metals have jumped this year on supply concerns due to the prolonged strikes in South Africa, one of the largest producers of platinum and palladium, and continued to strengthen Tuesday on news of a new strike, reports Tatyana Shumsky for the Wall Street Journal.

While platinum miners weren’t involved this time around, the National Union of Metalworkers strike still hit a little too close to home. [Platinum ETF to Remain Strong Despite End of Labor Strikes]

“That’s really adding to the supply fears right now,” Adam Klopfenstein, a senior market strategist with Archer Financial Services, said in the article.

Meanwhile, an unexpected rise in U.S. car sales is also supporting platinum and palladium – the precious metals are used in car-exhaust filters to diminish pollutants, with automobile use accounting for 38% of total platinum demand and 68% of palladium demand.

“June sales were stronger than expected, it shows you the economy is turning around and it’s a bullish sign for these metals,” Thomas Capalbo, a broker with Newedge, said in the article.

Meanwhile, the First Trust NASDAQ Global Auto Index Fund (NasdaqGM: CARZ) rose 1.7% Tuesday on the better-than-expected car sales growth. CARZ is up 3.8% year-to-date.

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