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SPPP Looking Superior as Palladium Powers Higher

Go-go days are here again for palladium as the metal is notching record highs on what feels like a regular basis. Obviously, that’s good news for the Sprott Physical Platinum and Palladium Trust (NYSEArca: SPPP).

SPPP provides “a secure, convenient and exchange-traded investment alternative for investors who want to hold physical platinum and palladium. The Trust offers a number of compelling advantages over traditional exchange-traded platinum and palladium funds,” according to the issuer.

Another supply deficit is helping palladium to the upside.

“It’s a confluence of factors,” says Tai Wong, head of metals derivatives at BMO Capital. “Fundamentally, there’s going to be a material deficit this year and automakers need to restock.”

SPPP Specs

The return to lower interest rates around the world has also continued to support demand for physical assets, which tend to exhibit an inverse relationship to interest rates since investors are less apt to hold raw materials when bonds offer higher yields in a rising rate environment. Though it’s not an ETF, SPPP offers tax benefits too.

SPPP “offers a potential tax advantage for certain non-corporate U.S. investors. Gains realized on the sale of the Trust’s units can be taxed at a capital gains rate of 15%/20% versus the 28% collectibles rate applied to most precious metals ETFs, coins, and bars,” notes Sprott.

“The palladium market has been in a production deficit for several years, and tighter pollution standards in Europe and China are spurring demand for the metal, which is commonly used in catalytic converters to curb emissions in gasoline-powered vehicles,” reports Mining.com. “Disruptions at Russian mines run by Norilsk Nickel, the world’s largest producer, have added to supply concerns.”

SPPP offers tax benefits too.

SPPP “offers a potential tax advantage for certain non-corporate U.S. investors. Gains realized on the sale of the Trust’s units can be taxed at a capital gains rate of 15%/20% versus the 28% collectibles rate applied to most precious metals ETFs, coins, and bars,” notes Sprott.

And there’s more upside on the demand side of the equation.

“Palladium is “benefiting from firming commodity demand readings and expectations for deficits following the Arctic mine disruptions,” TD Securities said in a note to Reuters.

For more news, information, and strategy, visit the Gold & Silver Investing Channel.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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