All that glitters isn't gold. The Aberdeen Standard Physical Palladium Shares ETF (PALL), the only ETF to track the price of physical palladium, has been burning up the performance charts of late and has well- outpaced competing precious metals funds, such as the SPDR Gold Trust (GLD) and the iShares Silver Trust (SLV).
Over a one-year period, PALL has risen 59.3%, making it the second-best-performing ETF behind only the Market Vectors-Indian Rupee/USD ETN (INR), which we covered last month (read: "ETF Of The Week: Indian Premiums & Returns").
Source: StockCharts.com; data as of Oct. 17, 2019
Tight Supply & High Demand
PALL's stellar performance is why we've made it our ETF of the Week, though longtime readers will probably remember that this isn't the first time we've done so.
However, since we last covered the fund in September 2018, PALL has nearly doubled in size; it's now up to $271 million (read: "ETF Of The Week: Palladium ETF Shines").
The reason has a lot to do with palladium's record high prices. In Thursday’s trading, the metal hit an all-time high of $1,783.21/ounce. In comparison, gold is trading near $1,494.50/ounce.
Palladium's price has been pushed higher by consistently tight supplies, as weak prices for platinum (which is often mined alongside palladium) have discouraged miners from increasing their output (read: "Under The Radar ETFs").
Meanwhile, demand continues to rise for the metal for the production of emissions-friendly automobile catalytic converters. As carmakers worldwide strive to meet greener standards, they'll need more and more catalytic converters—and more and more palladium.
Digging Into PALL
Like GLD, PALL is a grantor trust, a common commodity ETF structure required to hold a fixed portfolio. In this case, that's palladium bullion, custodied in J.P. Morgan-owned vaults in London and Zurich.
Notably, the all-in costs of PALL can be significant. At 0.34%, the ETF has a much higher average spread than other precious metals funds, like GLD and SLV. It also has a fairly high expense ratio: 0.60%.
Still, PALL exhibits decent volume, trading about $3.6 million daily, on average, and block liquidity remains strong. Institutions looking to trade in bulk usually can do so inexpensively and without moving the price of the underlying metal much.
Year to date, PALL has brought in $21 million in new net investment flows.
Contact Lara Crigger at [email protected]