Exchange-traded funds (ETFs) that offer investors exposure to precious metals primarily focus on gold and silver. But a lesser-known option is palladium, a silvery metal used mostly in catalytic converters but that also has applications in jewelry, electronics, and dental fillings. 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 in 2020. Russia was the biggest producer, with 91,000 kilograms, followed by South Africa at 70,000 kilograms. Russia accounted for 43% of the world's palladium supply in 2020, and South Africa accounted for 33%.
Due to palladium production's concentration and the small size of the palladium market, prices have historically been fairly volatile. Prices rose to over $3,000 per ounce in May 2021 before plummeting to less than $1,600 by December of that year. Palladium recovered through the beginning of 2022 before jumping to as high as $3,400 in March, spurred by Russia's invasion of Ukraine and subsequent sanctions. 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 Aberdeen Standard Physical Palladium Shares ETF is a pure-play palladium ETF.
- Palladium prices are volatile, largely because the market is small and easily moved by supply-and-demand dynamics.
1. Physical Palladium Shares ETF
ETF options for investing in palladium are relatively limited, but the Aberdeen Standard Physical Palladium Shares ETF (PALL) is perhaps the largest. As of Dec. 31, 2021, the fund held more than 181,391 troy ounces at a secured vault in London.
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. The fund was founded in December 2009 and, as of Feb. 28, 2022, has returned 14.91% annually since its inception. The annual expense ratio is 0.60%.
2. Sprott Physical Platinum & Palladium Trust
Like the Physical Palladium Shares ETF, the Sprott Physical Platinum & Palladium Trust (SPPP) also holds physical bullion as opposed to derivative securities. As of March 4, 2022, the ETF held more than 58,000 ounces of platinum and 43,000 ounces of palladium.
As of Jan. 31, 2022, the ETF has returned around 5% annually since its inception in December 2012. Trust unitholders may redeem their units for physical platinum or palladium on a monthly basis if they meet minimum redemption requirements. The fund has an annual expense ratio of 1.07%.
3. Physical Precious Metals Basket Shares
The Aberdeen Standard Physical Precious Metals Basket Shares ETF (GLTR) invests in a number of precious metals. As of Dec. 31, 2021, the fund held 305,575 ounces of gold, 61,103 ounces of palladium, 40,771 ounces of platinum, and 11.2 million ounces of silver. The metals are held at a secured vault in London. The fund has returned around 1.5% annually since its inception in October 2010. The annual expense ratio is 0.60%.