Palladium prices have popped almost 10% year to date after hitting a low of $395 and a high of $571. Palladium is typically used in auto manufacturing and prices are dependent on car sales and an improving global economic recovery.
The advent of the physically backed palladium exchange-traded fund, ETFS Physical Palladium Shares (PALL), however, has provided an easier way to invest and trade palladium. Since its creation in early January, the ETF has amassed a total of 788,505 ounces of palladium. The more metal ETF Securities removes from circulation, the higher prices rise. Shares have risen 3.2% year to date and the ETF currently has $358 million assets under management.
For investors looking for exposure to a riskier precious metal, many analysts recommend palladium. Soma sekhar Chereddy, analyst at Karvy Global Services, dubs the metal his favorite for 2010.What is your long-term and short-term price target for the metal? Chereddy: In 2010, we [think] the metal [will] touch around $675. By the end of this year, we [think prices will be] between $650 and $675. And over the next five years, we expect palladium to touch $1,000 an ounce. It's basically dependent on the long-term supply and demand situation. [We think] prices are going to double in the next five years. What are some of the risks? What if China's growth slows [resulting in] deceasing auto demand, how do you hedge against those risks? Chereddy: So 50% of demand comes from auto demand ... China just accounts for 13% for the auto production in the world. So ... we expect [a possible slowdown in China] not too dent [prices] so much ... Other metals, such as nickel, copper, are mainly dependent on China, but palladium is a different case, [palladium is] not dependent on China.
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