abrdn Precious Metals Basket ETF Trust

This section provides a brief introduction to the Bullion industries by looking at some of the key participants, detailing the primary sources of demand and supply and, with respect to the gold and silver industries, outlining the role of the “official” sector (i.e., central banks) in the markets.

In this annual report, the term “ounces” refers to fine troy ounces (with respect to gold only) and troy ounces (with respect to silver, platinum and palladium).

The Gold Industry

Market Participants

The participants in the world gold market may be classified in the following sectors: the mining and producer sector, the banking sector, the official sector, the investment sector, and the manufacturing sector. A brief description of each follows.

Mining and Producer Sector

This group includes mining companies that specialize in gold and silver production, mining companies that produce gold as a by-product of other production (such as a copper or silver producer), scrap merchants and recyclers.

Banking Sector

Gold bullion banks provide a variety of services to the gold market and its participants, thereby facilitating interactions between other parties. Services provided by the gold bullion banking community include traditional banking products as well as mine financing, physical gold purchases and sales, hedging and risk management, inventory management for industrial users and consumers, and gold deposit and loan instruments.

The Official Sector

The official sector encompasses the activities of the various central banking operations of gold-holding countries. From 2009 to 2019, the European Central Bank and other central banks of Europe operated under a series of four Central Bank Gold Agreements (“CBGA”). The CBGA limited the amount of gold that these banks were allowed to sell for the duration of each agreement, helping to stabilize the gold market. The CBGA had the desired effect, and the gold market has become more balanced, eliminating the need for a formal agreement going forward. According to statistics provided by the World Gold Council, as of Q4 2023, central banks are estimated to hold approximately 36,699 tonnes (“tonne” refers to one metric tonne, which is equivalent to 1,000 kilograms or 32,151 troy ounces) of gold reserves, or approximately 17% of existing above-ground stocks.

The Investment Sector

This sector includes the investment and trading activities of both professional and private investors and speculators. These participants range from large hedge and mutual funds to day-traders on futures exchanges, and retail-level coin collectors.

The Manufacturing Sector

The fabrication and manufacturing sector represents all the commercial and industrial users of gold for whom gold is a daily part of their business. The jewelry industry is a large user of gold. Other industrial users of gold include the electronics and dental industries.

World Gold Supply and Demand 2014-2023 (in tonnes)

The following table sets forth a summary of the world gold supply and demand for the period from 2014 to 2023 and is based on information reported by the World Gold Council.

Source: Metals Focus, Refinitiv GFMS, ICE Benchmark Administration, World Gold Council

The following are some of the main characteristics of the gold market illustrated by the table:

One factor which separates gold from other precious metals is that there are large above-ground stocks which can be quickly mobilized. As a result of gold’s liquidity, gold often acts more like a currency than a commodity.

Over the past ten years, (new) mine production of gold has experienced a modest rise of an average of 1.41% per annum. Of the three sources of supply, mine production accounts for 73.6% in 2023. Recycled gold volumes have ranged from 1,067 tonnes to 1,293 tonnes over the past 10 years.

On the demand side, jewelry is clearly the greatest source of demand. Industrial demand has fluctuated between 6.7% and 8.4% of total demand over the past 10 years. Exchange traded product inventory build had seen strong growth through 2012, followed by outflows in 2013, 2014 and 2015 as the price of gold fell by a cumulative 30% between 2013 and 2015. Exchange traded product inventory build has been positive each year from 2016 to 2020, but fell off in 2021. During the 2013 price crash, retail coin and bar demand rose to a 10-year high as retail investors, especially from China, were enticed by the falling prices. Retail coin demand tapered off in 2019, but has averaged 9.25% from 2020 to 2023. Demand from Central Banks and other institutions fluctuated between 8.8% and 14.8% from 2013 to 2019, before reaching a low of 6.9% in 2020. However, that figure has increased in each of the last three years, reaching a high of 23.4% in 2023.

Historical Chart of the Price of Gold

The price of gold is volatile and fluctuations are expected to have a direct impact on the value of the Shares. However, movements in the price of gold in the past are not a reliable indicator of future movements. Movements may be influenced by various factors, including announcements from central banks regarding a country’s reserve gold holdings, agreements among central banks, political uncertainties around the world, and economic concerns.

The following chart illustrates the movements in the price of an ounce of gold in U.S. Dollars from December 31, 2014 to December 31, 2024.

Source: Bloomberg, abrdn. Chart data from 12/31/2014 to 12/31/2024. Spot Gold Price = GOLDLNPM Index.

The price of gold tends to rise during periods of low real interest rates and high monetary expansion, as they are often associated with currency debasement and systemic financial failures. The price of gold peaked at $1,943.20 per ounce in January 2021 as the uncertainties regarding the pandemic drove prices higher. 2021 proved to be a volatile year for gold as major market events and continued pandemic uncertainty, coupled with new variants, allowed gold to remain in the investment picture during the year. Additionally, the trends of 3 years of investor outflows in global ETFs and net negative investor sentiment in gold futures positioning reversed in 2016 and continued through 2021. Continued low real interest rates, tepid economic growth, and concerns regarding the recovery of the pandemic were key tailwinds for gold that sparked a return of investor interest. 2022 proved to be another volatile year for gold as the price climbed as high as $2,039.05 per ounce in the weeks following Russia’s invasion of Ukraine. Aggressive interest rate hikes by the U.S. Federal Reserve coupled and a strengthening of the US Dollar saw ETF holders liquidate as the price of gold dropped as low as $1,628.75 per ounce on November 3, 2022. However, increased demand from central banks, along with the weakening of the U.S. Dollar, sparked a Q4 rally that saw the price of gold climb to $1,813.75 per ounce to close 2022.

Similarly in 2023, economic and geopolitical factors continued to drive volatility in the price of gold over the course of the year. While the central bank demand that sparked a fourth quarter rally remained strong throughout the year, a weaker US Dollar and a drop in US 10-Year Treasury Yields caused the price of gold to reach $1,932.45 per ounce on January 26, 2023. However, the disappointing Chinese economic recovery drove the price as low as $1,810.95 per ounce on February 24, 2023, before the US banking crisis increased the likelihood of US policy rate cuts and drove the spot price as high as $2,048.45 per ounce on April 13, 2023 as investors turned to gold in anticipation of lower interest rates. However, the subsequent interest rate hike by the U.S. Federal Reserve in May contributed to the price of gold falling as low as $1,899.60 per ounce on June 29th, 2023. The price of gold continued to fluctuate throughout the third quarter as a weaker dollar and central bank purchasing drove the spot price back up to $1,976.10 per ounce on July 20, 2023, however the U.S. Federal Reserve’s final interest rate hike of the year on July 26th increased the probability of a policy rate mistake given mixed economic news leading the price to close as low as $1,870.50 per ounce on September 29th, 2023. The spot price of gold continued to fall at the start of the fourth quarter, reaching as low as $1,818.95 per ounce on October 4, 2023, before the US Treasury shifted issuance to short duration bonds, lowering 10-year yields. While treasury market yields moved lower, removing the risk of excessive policy rate tightening, tensions in the Middle East increased with the attacks by Hamas on Israeli targets and civilians escalating the ongoing conflict between the two entities. Subsequently, the spot price of gold climbed as high as $1,997.60 per ounce on October 30, 2023. The spot price of gold retracted over the first half of November before speculation of potential interest rate cuts in the US and Chinese economic stimulus drove the spot price of gold to an all-time high of $2,078.40 per ounce on December 28, 2023.

In 2024, the spot price of gold was relatively flat to start the year as metals investors focused on hopes of economic stimulus out of China making a meaningful rise in demand in more cyclically exposed metals like copper and silver. This led to a continuation of the sharp reduction in gold owned by ETF investors into March, which moderated into June. From July to October these investors added to positions helping support gold prices as central bank purchases continued albeit without the Peoples Bank of China which halted purchases between June and October. The primary motivator for central bank purchases of gold are as a foreign exchange reserves diversifier away from U.S dollars and Treasuries at the margin. The Council of Foreign Relations notes a primary risk to emerging market economies comes from sanctions, tariffs and U.S. dollar trading system bans on behest of western economies. The results of the U.S. election raise the prospects of sanctions, and tariffs and thus the motivation to continue reserve diversification with gold purchases.

The Silver Industry

Market Participants

The participants in the world silver market may be classified in the following sectors: the mining and producer sector, the banking sector, the official sector, the investment sector, and the manufacturing sector. A brief description of each follows.

Mining and Producer Sector

This group includes mining companies that specialize in silver and silver production, mining companies that produce silver as a by-product of other production (such as a copper or gold producer), scrap merchants and recyclers. According to The Silver Institute’s World Silver Survey 2024, the top 20 producing countries are set forth in the table below. As the World Silver Survey 2024 was published in April 2024, information for 2024 is not available as of the date of this report.

Source: The Silver Institute - World Silver Survey 2024 (Metals Focus)

Banking Sector

Bullion banks provide a variety of services to the silver market and its participants, thereby facilitating interactions between other parties. Services provided by the bullion banking community include traditional banking products as well as mine financing, physical silver purchases and sales, hedging and risk management, inventory management for industrial users and consumers and silver leasing.

The Official Sector

There are no official statistics published by the International Monetary Fund, Bank of International Settlements, or national banks on silver holdings by national governments. The main reason for this is that silver is generally not recognized as a reserve asset.

Consequently, there are very limited silver stocks held by governments. According to The Silver Institute World Silver Survey 2024, the identifiable silver bullion inventories are as set forth in the table below. As the World Silver Survey 2024 was published in April 2024, information for 2024 is not available as of the date of this report.

*Identifiable Silver Bullion Inventories

** Year-end; Source: The Silver Institute – World Silver Survey 2024 (Metals Focus, LBMA, CME, SGE, SHFE, MCX & OCE)*

The Investment Sector

This sector includes the investment and trading activities of both professional and private investors and speculators. These participants range from large hedge and mutual funds to day-traders on futures exchanges, and retail-level coin collectors.

The Manufacturing Sector

The fabrication and manufacturing sector represents all the commercial and industrial users of silver. Industrial applications comprise the largest use of silver. The jewelry and silverware sector is the second largest, followed by the photographic industry (although the latter has been declining over a number of years as a result of the spread of digital photography).

World Silver Supply and Demand 2015-2024

The following table sets forth a summary of the world silver supply and demand for the period from 2015 to 2024 and is based on information reported by the World Silver Survey 2024, published by The Silver Institute. As the World Silver Survey 2024 was published in April 2024, the table below includes forecasted information for 2024 as of the date of publication. As of the date of this report, final figures (i.e., non-forecasted) for 2024 are not yet available.

** Forecasted*

Source: The Silver Institute - World Silver Survey 2024 (Metals Focus)

The following are some of the main characteristics of the silver market illustrated by the table.

The balance between silver supply and demand is a fundamental driver of its price. Silver has some of the same drivers of investment demand as gold, in that it can be used as a hedge against inflation or currency devaluation, or for portfolio diversification as an alternative currency. As such, silver investment demand may be influenced by interest rates. Silver, unlike gold, has a significant demand for industrial applications, such as electronics, solar panels, and medical equipment, due to its unique properties, such a high thermal and electrical conductivity.

New mine production accounts for approximately 84% of total silver supply. Recycled silver accounts for around 18% of total supply.

Industrial applications and jewelry demand accounted for over 72% of total demand in 2023. Photography has been taking a lower share of overall silver demand falling from 4% in 2015 to 2% in 2023, while photovoltaic demand has risen in recent years accounting for 16% in 2023. Net physical investment (i.e. in coins and bars) accounted for 20% of demand in 2023, down from 26% in 2021-2022.

Historical chart of the price of Silver

The price of silver is volatile and fluctuations are expected to have a direct impact on the value of the Shares. However, movements in the price of silver in the past are not a reliable indicator of future movements. Movements may be influenced by various factors, including announcements from central banks regarding a country’s reserve silver holdings, agreements among central banks, political uncertainties around the world, and economic concerns. The following chart illustrates the movements in the price of an ounce of silver in dollars from December 31, 2014 to December 31, 2024 and is based on information provided by Bloomberg:

Source: Bloomberg, abrdn. Chart data from 12/31/2014 to 12/31/2024. Spot Silver Price = SLVRLND Index.

Starting in early 2011, when prices peaked at $48.44 per ounce, silver prices began a downward trend, albeit with multiple upwards rallies (that have often lasted several months). The rise in the value of the U.S. Dollar, sluggish industrial growth and a tame inflation environment (which led some investors to revise their expectations of the effects of monetary expansion) were some of the drivers behind the fall in silver prices from 2011 to 2019. Silver reversed course in 2020, as prices rose 46.75%, closing at $26.49 per ounce, making it the top performer of the four metals (gold, silver, platinum, palladium). In 2021, silver took a slight step back after its historic performance in 2020, as it returned -14% (as of December 31, 2021). Throughout 2021, silver took a backseat to riskier asset classes, such as equities, which was one of the reasons for its negative performance during the year.

2022 was a volatile year for silver. On March 7, 2022, in response to Russia’s invasion of Ukraine, the LBMA suspended five Russian silver refiners. Fewer suppliers to the LBMA may lead to a lower supply of Good Delivery silver and further volatility in the price of silver. See “Risk Factors—War, a major terrorist attack and other geopolitical events, including but not limited to the war between Russia and Ukraine…may lead to extended periods of price volatility” for additional information regarding the LBMA’s suspension of the Russian silver refiners. The price of silver reached as high as $26.41 per ounce in the weeks following Russia’s invasion of Ukraine, up more than 13% from the end of 2021, as the invasion, and the threat of sanctions on Russian exports, including silver, pushed prices higher. The price of silver fell as low as $17.81 per ounce at the beginning of September 2022, as the risk of diminishing global economic growth, and aggressive interest rate hikes by the U.S. Federal Reserve caused the U.S. Dollar to strengthen, and silver prices to weaken, in concurrence with a slowing economy. The potential of a weakening U.S. Dollar, amidst low silver inventory levels and a reopening Chinese economy, sparked a rally in the fourth quarter of 2022 that saw the price of silver climb 25.9% over the quarter to close the year at $23.95 per ounce as of December 31, 2022. Despite the volatile year, in 2022 the price of silver rose 2.8% above its 2021 closing price.

The strong demand and reduced supply trends that were prevalent towards the end of 2022 were expected to continue in 2023; however, economic and geopolitical factors continued to drive volatility in the price of silver over the course of the year. While the spot price remained relatively flat to start the year, a disappointing Chinese economic recovery drove the price as low as $20.09 on March 10, 2023, before a U.S. banking crisis increased the likelihood of U.S. policy rate cuts and drove the spot price as high as $25.84 per ounce on May 5, 2023, as investors turned to silver in anticipation of lower interest rates. However, the subsequent interest rate hike in May contributed to the price of silver falling as low as $22.34 per ounce on June 23, 2023. The price of silver continued to fluctuate throughout the third quarter of 2023 as a weaker dollar pushed the spot price back above $25 per ounce on July 19, 2023; however, the U.S. Federal Reserve’s final interest rate hike of the year on July 26 increased the probability of a policy rate mistake, given mixed economic news, leading the price to close as low as $22.55 per ounce on September 28, 2023. The spot price of silver continued to fall at the start of Q4 2023, reaching as low as $21.06 per ounce on October 3, 2023, before the U.S. Treasury shifted issuance to short duration bonds, lowering 10-year yields. As Treasury market yields moved lower, removing the risk of excessive policy-rate tightening, the price climbed to $23.22 per ounce on October 20, 2023. The spot price of silver remained relatively steady over the next few weeks before speculation of potential interest rate cuts in the U.S. and Chinese economic stimulus drove the spot price of silver as high as $25.17 per ounce on December 4, 2023. The price of silver ultimately ended the year at $23.79 per ounce on December 29, 2023, down -0.65% for the year, as market participants were disappointed by the lack of economic stimulus in China.

In 2024, the spot price of silver began the year on a downward trend as the economic stimulus out of China at the end of 2023 disappointed investors and had little immediate effect on the economy. The potential for U.S. interest rate cuts inspired some increased attention by investors over the summer months. The U.S. Federal Reserve’s interest rate cut provided an additional tailwind that would send the price as high as $32.48 per ounce on September 26, 2024. Headwinds grew as the US election resulted in an increased potential of tariffs that are large enough to slow Chinese economic growth. Overall, the year was marked by alternating optimism and pessimism on China’s economic activity and levels of stimulus. Additional volatility came from a disappointing energy transition in the U.S. despite an outperforming energy transition in China where silver’s use in solar panel manufacturing is key.

Platinum Group Metals

Platinum and palladium are the two best known metals of the six platinum group metals (“PGMs”). Platinum and palladium have the greatest economic importance and are found in the largest quantities. The other four—iridium, rhodium, ruthenium and osmium—are produced only as co-products of platinum and palladium. PGMs are known for their purity, high melting points and unique catalytic properties. In addition to their oxidation and reduction properties, they are also extremely resistant to corrosion. PGMs are utilized in a number of industrial processes, technologies and commercial applications. Their unique chemical and physical properties make PGMs an excellent raw material, catalyst and ingredient for manufacturing processes. Consumer and industrial products made with platinum and other PGMs include flat panel monitors, glass fiber, medical tools, computer hard drives, nylon and razors, among others. PGMs play a critical role in autocatalysis and pollution control in the automotive sector.

PGM mining is heavily concentrated in southern Africa (South Africa and Zimbabwe), with smaller percentages coming from the United States, Russia and other locations. South Africa is the world’s leading platinum producer and one of the largest palladium producers. Russia is the second largest producer of platinum and palladium. All of South Africa’s production is sourced from the Bushveld Igneous Complex, which hosts the world’s largest resource of PGMs. Together, South Africa and Russia accounted for over 83% of platinum supply and 77% of palladium in 2023.

Platinum

World Platinum Supply and Demand 2014-2023

The following table sets forth a summary of the world platinum supply and demand over the last 10 years (from 2014 to 2023) and is based on information reported by Johnson Matthey, PGM Market Reports (2015 – 2024).

Source: Johnson Matthey PGM Market Reports (2015 – 2024)

The following are some of the main characteristics of the platinum market illustrated by the table:

The main supplier of platinum is South Africa, providing approximately 71.4% of total mine supply over the past 10 years (2014-2023). Russia is the second largest supplier of platinum. Its share of world mine production has averaged around 11.7% of total mine supply over the past ten years ended 2023. Scrap supply from recycling of autocatalyst and other sources have accounted for about 24% of total supply over the last 10 years.

Over the ten years ended December 2023, jewelry demand for platinum peaked at approximately 36% of total demand in 2014. Jewelry demand has since declined to 18% total demand in 2023, following a consistent downward trend. Automotive demand for platinum, which accounted for around 36% of total demand at the end of 2014, has increased to roughly 44% of total demand as of the end of 2023. Following two consecutive years of growth, investment demand fell from a high of 14% in 2020 into negative territory in 2022 at (9%) but improved to 1% in 2023. Pollution control demand, which captures the production demand of non-road vehicles such as agricultural equipment and industrial machinery as well as small engines and stationary source emissions controls in factories that use technology that is similar to autocatalysts, increased to 4% of total demand in 2023.

Historical Chart of the Price of Platinum

The price of platinum is volatile and fluctuations are expected to have a direct impact on the value of the Shares. However, movements in the price of platinum in the past are not a reliable indicator of future movements. The following chart illustrates the movements in the price of an ounce of platinum in U.S. Dollars from December 31, 2014 to December 31, 2024 and is based on information provided by Bloomberg:

Source: Bloomberg, abrdn. Chart data from 12/31/2014 to 12/31/2024. Spot Platinum Price = PLTMLNPM Index.

In 2012, platinum prices rose on the back of supply disruptions in South Africa, which accounts for more than 72% of the world’s supply of platinum. A strike at one of South Africa’s biggest platinum mines caused the price of platinum to rise from $1,387 to $1,709 per ounce in August 2012. At the beginning of 2013, Anglo American Platinum, the world’s biggest producer of the metal, announced its intention to close four mine shafts and its consideration of selling another mine complex as part of a radical overhaul of its South African operations. This statement prompted a strong reaction on platinum prices, which rose from $1,656 to $1,736 per ounce in the days following the announcement, on fears of a further tightening in platinum supply. However, platinum’s correlation to gold weighed on platinum prices in 2013 overall. Prolonged strikes at South African mines in 2014 led to the deepest supply deficit in platinum since 1975 (the earliest date we have supply and demand data). However, that failed to arrest the price slide which saw prices fall 11% in 2014, highlighting the extent of negative sentiment towards industrially-exposed precious metals. Despite autocatalyst demand for platinum increasing in 2015, tightening nitrogen oxide emission standards have led to pessimism about the future demand for platinum-heavy diesel autocatalysts relative to palladium-heavy gasoline autocatalysts. Further pessimistic outlook for South Africa’s economy and its currency the South African Rand weighed on platinum prices throughout 2017, and platinum continued to fall in 2018 driven by lackluster investor sentiment, a stronger US dollar, weaker diesel demand and rising mine supply. Platinum prices bounced back, rising 19.9% to $952 per ounce at the end of 2019. After seeing the price fall as low as $593 per ounce on March 19, 2020, platinum rebounded from pandemic lows and finished the year at $1,068 per ounce. The steep climb in palladium price has led some investors to conclude that platinum appears under-valued, in view of its potential to substitute for palladium in automotive applications in the future. Additionally, the outlook for mining in South Africa is increasingly uncertain, with producers facing steep increases in electricity prices, periodic disruption to power supplies and a risk of industrial action during anticipated wage negotiations. In 2021, platinum took a back seat to risky assets, similarly to other precious metals, as it returned -10% (as of December 31, 2021). Follow through from auto production disruptions during the pandemic were a major contributor to the price performance in 2021. The price of platinum reached as high as $1,151 per ounce on March 8, 2022, as Russia’s invasion of Ukraine and the threat of sanctions on Russian exports, including platinum, pushed prices higher. However, while other precious metals (gold, silver, palladium) saw prices fluctuate throughout the year, platinum’s volatility was much more pronounced within the first quarter of 2022, as the price fell roughly 15% by March 31, 2022, to close the first quarter at $983 per ounce. Aggressive interest rate hikes by the U.S. Federal Reserve, a strong U.S. Dollar and risks of diminishing global economic growth exerted additional pressure on prices, as the price of platinum fell as low as $831 per ounce on July 14, 2022. Through the end of 2022, increasing autocatalyst demand and a growing substitution of platinum for palladium contributed to ongoing physical market tightness, despite a global surplus, which saw the price of platinum increase roughly 24% from July 14, 2022 through December 31, 2022 to $1,031 per ounce.

In 2023, a decrease in platinum production in South Africa, the world’s leading producer, has continued to impact global supply (see “World Platinum Supply and Demand in 2023” above for additional discussion). While industry analysis groups see potential for a nearly 1-million-ounce deficit in platinum in 2023, the price performance has not reflected this sentiment over the course of the year as the market remains well supplied pulling from existing above ground stockpiles. Despite a positive outlook at the beginning of the year, fueled by China’s rollback of Covid-related restrictions, that drove the price as high as $1,128 per ounce on April 21, 2023, the Chinese economic rebound disappointed investors and led the price of platinum to fall as low as $850 per ounce on November 13, 2023. While an end-of-year rally saw the price of platinum increase roughly 18% off the yearly low to $1,000 per ounce, platinum ended the year approximately 3% below its 2022 closing price.

In 2024, mining production in South Africa has continued to impact global supply, as the country experiences some remaining power supply disruptions, although at a far lower pace than in 2023. Political instability, inflation and volatile market prices have compressed profit margins and subsequently led to a decrease in expected supply from the world’s leading producer. As a result, platinum markets remained volatile throughout the year while prices have not responded to the existing supply side deficit as above ground stocks are being worked through. An increase in expected automotive demand provided some tailwinds during the first half of the year sent the spot price of platinum as high as $1,065 per ounce on May 17, 2024. However, the lackluster Chinese economic rebound and disappointing level of stimulus turned to headwinds as the price retreated to $910 per ounce. The risk of additional sanctions on Russian metal exports in October provided some temporary price support, however market fears over supply restrictions quickly dissipated, and prices retreated once more. Headwinds grew as the US election resulted in an increased potential of tariffs that are large enough to slow global economic growth and the spot price of platinum ended the year down -8.6%, at $914 per ounce.

Palladium

World Palladium Supply and Demand 2014-2023

The following table sets forth a summary of the world palladium supply and demand for the period from 2014 to 2023 and is based on information reported by Johnson Matthey, PGM Market Report.

Source: Johnson Matthey PGM Market Reports (2014 – 2023).

The following are some of the main characteristics of the palladium market illustrated by the table:

Russia has traditionally been the largest producer of palladium, providing on average 40% of supply over the past 10 years. South Africa has, on average, supplied approximately 37% of production over the past 10 years. In 2023, Russia provided 41.2% of mine supplies, while South Africa produced 35.8%. North America contributed approximately 13.2% of mine supply in 2023. Scrap supply, from recycling of autocatalyst and other sources, accounted for roughly 30% of total supply in 2023, down from a high of 34.6% in 2022.

Autocatalysts continue to be the largest component of palladium demand, averaging 84.3% of total demand from 2015 to 2023, compared to 71% in 2014. Jewelry demand for palladium has tapered off considerably over the last 10 years, contributing only 0.8% of total demand in 2023, down from a high of 2.6% in 2014. Other industrial demand (chemical, dental and electrical) has fallen from 19.8% of total demand in 2015 to 12% of total demand in 2023. Since 2014, pollution control demand has increased from 0.5% to 1.3% of total demand. Pollution control demand captures the production demand for emissions control in non-automotive applications.

Historical Chart of the Price of Palladium

The price of palladium is volatile and fluctuations are expected to have a direct impact on the value of the Shares. However, movements in the price of palladium in the past are not a reliable indicator of future movements. The following chart illustrates the movements in the price of an ounce of palladium in U.S. Dollars from December 31, 2014 to December 31, 2024 and is based on information provided by Bloomberg:

Source: Bloomberg, abrdn. Chart data from 12/31/2014 to 12/31/2024. Spot Palladium Price = PLDMLNPM Index.

Rising palladium prices tempered in 2011, but concerns over supply shortages due to labor problems at mines in South Africa and dwindling Russian stocks provided some price support into mid-2012. Palladium rose to a 13 year high of $907 per ounce in September 2014, a 27% increase from the start of the year. The rally was driven by supply side concerns following the longest strike in South African mining history and escalating tensions between Russia and Ukraine. The strong rally in 2014 was completely unwound in 2015, when South African mine supply resumed back to pre-strike levels and pessimism about industrial demand in China overwhelmed the true tightness in the market. Palladium was then the top performer of the precious metals complex for 3 consecutive years from 2017 to 2019, where it rose nearly 182% from $676 per troy ounce on December 31, 2016 to $1,905 per troy ounce on December 31, 2019. The price of palladium reached an all-time high of $2,781/oz on February 19, 2020, before closing out the year at a price of $2,342/oz on December 31, 2020. Similar to other precious metals, palladium took a step back in 2021 as it returned -16% (as of December 31, 2021). A decline in autocatalyst demand due to the pandemic was a big reason for the negative performance seen during the year.

The price of palladium reached a record high of $3,015 per ounce on March 7, 2022, as Russian’s invasion of Ukraine infused uncertainty into global markets and created additional price pressure that pushed the price of palladium nearly 53% above its 2021 close. While each of the precious metals (gold, silver, platinum) saw prices fluctuate throughout the year, the price of palladium showed greater correlation with the price of Platinum during the first quarter. The price of palladium fell by roughly 25% between March 8 th and March 31st, ending the first quarter at a price of $2,259 per ounce. On June 14th, 2022 the price of palladium fell as low as $1,810 per ounce, as aggressive interest rate policies from the U.S. Federal Reserve drove the U.S. Dollar higher. Contrary to the other three precious metals, the price of palladium increased as high as $2,315 per ounce on October 4th, 2022, as supplies were further constrained by operational challenges in South African and North American mines, as well as a weaker automotive recycling market. Throughout the year, tailwinds from supply disruptions were countered by weaker automotive and investment demand, higher interest rates and the risk of a potential recession. As a result, while the other three precious metals rallied to end the year, the price of palladium reversed course during the fourth quarter to end the year at $1,775 per ounce, down 10% from the end of 2021.

In 2023, palladium production in Russia and South Africa have continued to impact global supply. Russian production was relatively flat compared to 2020 and 2021, however sanctions imposed in 2022 constrained the production capacity of Russian metals producer Nornickel, the world’s largest palladium producer. In contrast, South Africa continues to experience power supply disruptions along with rising electricity prices. Coupled with labor strikes, political instability, inflation and volatile prices, which have compressed profit margins and subsequently led to a decrease in expected supply from the world’s second leading producer. However, despite the supply deficit, investors have sold short a large amount of palladium this year, in hopes that electric vehicles will curtail the demand for palladium in gasoline-powered automobiles. Additionally, while a positive outlook at the beginning of the year, fueled by China’s loosening of COVID-19 related restrictions, drove the price as high as $1,628 per ounce on April 21, 2023, the Chinese economic rebound disappointed investors. As a result of these two factors, the price of palladium continued on a downward trend throughout most of the year before reaching a low of $957 per ounce on December 6, 2023. Fears of additional Russian sanctions sparked a year-end rally that saw the price climb as high as $1,221 per ounce on December 20, 2023, but the precious metal ultimately ended the year at $1,136 per ounce, 36% below its 2022 closing price.

In 2024, palladium markets continued to be volatile as the market remained net short and prices have not responded to the existing supply side deficit as the market works through above ground stockpiles. While autocatalyst demand continues to be the largest component of palladium demand, it has not yet returned to pre-pandemic levels, and the price remained between $850 and $1,050 per ounce for much of the year. In October, the threat of potential new sanctions on Russian exports, which accounts for roughly 40% of new mined supply, sent the price as high as $1,222 per ounce on October 29, 2024, as short sellers bought long contracts to reduce their positions. However, once market fears about disruptions in supply dissipated the spot price retreated and ultimately ended the year at $909 per ounce on December 31, 2024 (-19.98%).