Palladium: An Effective Hedge Against Russian Geopolitical Risk

August 29, 2014

Concerns mount that palladium supply from Russia, the world's largest producer, will be constrained.


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The price of palladium is up more than 25 percent this year and rapidly approaching 15-year highs set in 2001. Earlier this year, miner strikes in South Africa—the world's second-largest palladium supplier—drove the price higher. Now, concerns about the world's largest palladium producer, Russia, are pushing prices even higher.

Palladium has been one of the most effective ways to hedge geopolitical risk from Russia and Ukraine. The other way investors might hedge this risk is by shorting broad baskets of Russia equities, but given their low valuations and dividend yield (about 4 percent), this approach is both risky and expensive.

As its name suggests, the ETFS Physical Platinum ETF (PALL | A-100) tracks the spot price of palladium by physically owning palladium bullion in London and Zurich. The fund is highly liquid and efficient, making it an appropriate vehicle for establishing a long position in palladium.

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