Commodities ETP round-up: Palladium hit by ongoing emissions scandal

Nov 10th, 2015 | By | Category: Commodities

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ETF Securities, a leading provider of commodity-based exchange-traded products, has released its latest weekly multi-asset research report highlighting trends in commodities markets. The following is a summary of the main moves over the week.

Weekly commodity ETP round-up: Palladium hit by ongoing emissions scandal

A strengthening dollar weighed heavily on ETPs covering gold and energy markets while platinum- and palladium-based products were affected by industry specific events such as financial trouble of major suppliers as well as Volkswagen’s broadening emissions scandal.

ETF Securities Weekly Commodity Round-up – 9 November 2015

Gold and Energy-based ETPs reacted to a strengthening dollar while Palladium prices fell on the back of a growing Volkswagen emissions scandal.

Last week, the US Bureau of Labour Statistics released their monthly payroll report; the findings surpassed analysts’ consensus with latest figures indicating a net increase of 271,000 non-farm payrolls, bringing the official unemployment rate to 5%. Unemployment in the US now remains below half its 2009 peak, strengthening the position for a December rate hike by the US Federal Reserve. The result was a firmer dollar with the ETFS Long USD Short EUR (EUUS) and the ETFS Long USD Short GBP (GBUS) gaining 0.9% and 0.2% over the week.

The result of a strengthening greenback coupled with growing investor appetite for ‘risk-on’ assets depressed the price of gold with ETFS Physical Gold (PHAU) falling 3.7% over the last seven days. There was a similar effect on energy markets, despite latest figures from Baker Hughes, one of the world’s largest oil field services companies, showing that the active US rotary rig count decreased by four to 771 for the week of 6 November 2015; ETFS Brent Crude (BRNT) and ETFS WTI Crude Oil (CRUD) fell 1.7% and 1.4% respectively.

Palladium exhibited one of the largest falls in commodity prices this week as investors abandoned the precious metal. Around 70% of palladium is used in catalytic converters, mostly for petrol-based engines. When the Volkswagen diesel emissions scandal broke, Palladium received a boost as analysts estimated a significant shift in demand away from diesel engines and towards those using gasoline. With the scandal now potentially affecting gasoline engines too, investors have become increasingly wary of the metal’s future price course; the ETFS Physical Palladium (PHPD) dropped in value by 9.1% over the past week.

Continuing with the precious metals, the price of platinum also dropped. Investors who held the ETFS Daily Short Platinum (SPLA) would have enjoyed gains of 4.1%. The direction of the metal’s price over the coming weeks may trend upwards however, after Lonmin, the world’s third largest producer, raised insolvency concerns, potentially causing a shortage in future supply.

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