An exchange traded fund designed to track the price of palladium is known as a palladium ETF. Palladium ETFs are open ended mutual funds fully backed by insured physical palladium bars stored in secure storage vaults.
With palladium ETFs, investors can own palladium, thereby gaining exposure to its price, but do not have to grapple with the inconvenience (and risk) of keeping large quantities of the physical palladium metal.
Each certificate or share entitles the holder an ownership to a specific amount of palladium. To pay for management fees and also for the storage and insurance of the physical palladium bars, a small quantity of the precious metal is sold periodically. Hence, the amount of palladium represented by each certificate decline slowly over time.
Like all securities, there is a commission (typically around 0.4%) for buying or selling palladium ETFs. In some countries, investing in palladium ETFs is a way to avoid the VAT (sales tax) which would be applicable when buying physical palladium coins or bars.
Up till today, the only palladium ETF available to investors is the ETFS Physical Palladium (PHPD) launched by ETF Securities Ltd on the London Stock Exchange. More palladium ETFs are expected to be launched although the major producers of palladium are not in favor of them since the resultant hoarding of palladium bars will take away supply of the scarce precious metals that are needed by the various industrial users. In a supply constrainted environment, such hoarding can push prices up dramatically and accelerate the sourcing of replacement materials.
How to Start Trading Palladium ETFs
To buy or sell palladium ETFs, you need to open a trading account with an online stock brokerage such as TD Ameritrade. We recommend TD Ameritrade as they provide a virtual trading platform where beginners can try out stock trading in real market conditions without using real money.