Investors have more than $60 billion in exchange traded funds (ETFs) focused on precious metals, much of it in gold and silver. But a lesser-known option for precious-metals investors is palladium, a silvery metal chemically similar to platinum. It's used primarily in catalytic converters but also has applications in jewelry, dentistry, and electronics. Palladium and other platinum-group metals, such as rhodium and ruthenium, are somewhat rare, keeping their prices relatively high.
The U.S. is a relatively minor producer of palladium, generating an estimated 14,000 kilograms (494 million ounces) in 2018. Russia was the biggest producer, with 85,000 kilograms, followed by South Africa at 68,000 kilograms.
Palladium prices have historically been fairly volatile. In 2001, the price peaked at nearly $1,100 an ounce before plummeting to less than $200 two years later. As of late 2019, it traded for around $1,670 an ounce, up about 30% for the year. Investors interested in adding palladium to their portfolios might find the easiest path is through ETFs or similar vehicles.
- There are several exchange traded funds that invest in palladium, a rare metal with industrial and other applications.
- The largest such fund is ETFS Physical Palladium Shares.
- Palladium prices are volatile, largely because the market is small and easily moved by supply-and-demand dynamics.
ETFS Physical Palladium Shares
The menu of ETF options for investing in palladium is relatively limited, but the ETFS Physical Palladium Shares ETF (NYSEARCA: PALL) is the largest, with assets of around $265 million as of November 2019. ETF Securities launched the fund in 2010. It manages several other commodity-based ETFs.
PALL fund may be the purest palladium play given that its prices derive directly from the London Platinum and Palladium Market, a major trading center for platinum-group metals. PALL has performed well since 2016, rising a compounded annual average of 35%, responding to a general flight to quality by investors leaving riskier assets for traditionally safer havens such as precious metals and Treasuries.
As of Nov. 18, 2019, the fund was up about 48% from a year earlier. PALL charges an annual expense ratio of 0.6%.
Sprott Physical Platinum & Palladium Trust
The Sprott Physical Platinum & Palladium Trust (NYSEARCA: SPPP) operates in a substantially similar manner to the ETFS Physical Palladium Shares ETF in that it owns platinum and palladium bullion, as opposed to derivative securities. It aims to maintain a 50/50 weighting in the two metals.
As a closed-end trust, not an ETF, the fund invests in a fixed volume of both platinum and palladium, and the shares trade just like any other stock or ETF. Investors may redeem units once a month and take delivery of bullion if they meet certain redemption minimums. The fund has $105 million in assets and reported a 2018 expense ratio of 1.02%.
ETFS Physical Precious Metals Basket Shares
The ETFS Physical Precious Metals Basket Shares (NYSEARCA: GLTR) invests in a broad array of precious metals, although palladium is a relatively small portion of the portfolio. As of November 2019, the fund had 58% of assets invested in gold, 24% in silver, 14% in platinum and 4.6% in palladium.
The fund is managed by the same company that administers PALL and operates in a similar manner. It invests in bullion and stores it in a secure London facility. The fund has more than $450 million in assets under management and charges an annual expense ratio of 0.6%.