One of the least well-known precious metals continues to shine brightly this year – palladium.
The Federal Reserve released its Open Market Committee minutes last Wednesday which highlighted differences of opinion among the 19 policymakers at the Federal Reserve about how long the unlimited quantitative easing program will continue. What did they say? “A number of participants stated that an ongoing evaluation of the efficacy, costs, and risks of asset purchases might well lead the (policy-setting) committee to taper or end its purchases before it judged that a substantial improvement in the outlook for the labor market had occurred.” With this potential removal of liquidity from the markets at some point in the future, perhaps as early as the end of 2013, the precious metal sectors were hit hard. Gold spot fell almost $50 dollars on an intra-day basis before recovering slightly at the end of the day. The silver spot price fell almost $1.30 over the same time period. Despite this disagreement between policy makers, the central bank continues to purchase $85 billion in bonds every month and maintain a zero-percent interest rate policy.
We like to look at the largest precious metals ETF’s to gauge investor sentiment on this type of correction and last week we spotted an interesting divergence. Using data from Bloomberg, one can see a substantial drop in outstanding shares of the largest gold ETFs, but no drop in the outstanding shares of the largest silver, platinum nor palladium ETFs. So despite the negative price action in the precious metals space, these ‘white-metals’ investors are holding tight. In fact, when one looks deeper into the palladium market, the increase in investor participation has been substantial.