Title: Friday POW! — PALL (palladium ETF) Buy reiteration Show: Haymaker (David Hay Substack) — Friday POW! (Pick of the Week) Date: 2026-08-21 (AUG 21, 2026, PAID post) URL: https://haymaker.substack.com/p/friday-pow-b0b Note: Verbatim body captured via Stephen's logged-in Chrome session (paid post). Written post — no (mm:ss) timestamps.
Legend
ICE = internal combustion engine HEV/FHEV = full hybrid electric vehicle/full hybrid (cannot be plugged in) PHEV = plug-in hybrid electric vehicle NEV = new energy vehicle (a Chinese umbrella classification of all non-ICE vehicles) BEV = battery electric vehicle; in U.S. parlance, an EV Pd = palladium
This is a reiteration of our original recommendation, that longtime Haymakers may recall, of PALL, the palladium ETF, in April 2024. Our bullish thesis on it back then was contrarian and it has returned to out-of-favor status today. We are coming back to it now because palladium has significantly corrected within what we believe is a long-term uptrend at the same time that the fundamental supply/demand story has strengthened. Additionally, the macro backdrop underpinning the hard-asset thesis has moved further in our direction, particularly the trend toward monetary debasement, as we will discuss.
Key Highlights
Original recommendation was in April of 2024; we are now reiterating our buy following a 1/3 correction from January 2026 apex of just over $2,000/ounce
BofA Q4 2026 target ~$2,200/oz implying ~70% upside from spot; its base case is for flat to roughly a 23% gain
YCC (Yield Curve Control to be explained below) is a tail-wind due to its inflationary implications
85-90% of global palladium demand is from automotive catalytic converters; ICE and hybrid vehicles require palladium; "pure" BEVs do not
PHEVs are the dominant growth segment of the "EV market"; they retain full catalytic converters and in some configurations consume more palladium than conventional ICEs
In China, NEVs, led heavily by PHEVs, surpassed 60% of monthly auto sales in 2026; BYD (the world's largest auto exporter) PHEV exports grew from 11.6% to 37% of total export mix; Chinese PHEV exports to China ripped +700%+ YoY
Global supply in deficit since 2012; 0.9 million/oz deficit 2023, 0.5 million/oz 2024; Russia (Nornickel ~40%) + South Africa (~35%) control ~75-80% of primary supply
The Macro Backdrop: Yield Curve Control (YCC) and Hard Assets
We are entering what we believe is a new era of YCC. When central governments begin suppressing interest rates to manage sovereign debt costs (explicitly as Japan has done, implicitly as other OECD sovereigns are doing) the monetary debasement implications for real assets are profound. U.S. Treasury Secretary Scott Bessent's high-profile announcement this week to "twist the yield curve", by selling short-term Treasuries to buy longer term issues, ignited a roaring rally in the hard-asset space, as you likely noticed (a happy event for Haymaker followers). The market reasonably believes this is a definitive first step toward YCC.
Precious metals are the obvious beneficiary, but industrial metals also benefit as hard assets, often with highly favorable supply-demand characteristics of their own. Palladium is a special case because it qualifies as both a quasi-monetary asset (it is part of the Platinum Group Metals, or PGM) and it has industrial supply-demand dynamics that are separately compelling.
The Demand Story the Consensus Got Wrong
When we made our April 2024 recommendation, the dominant view was twofold: EVs are taking significant share from ICEs, and EVs use virtually no palladium. We believed this was wrong then and we think it's even more so now. The consensus assumed the internal combustion engine-to-EV transition would be binary and swift. What has actually happened is that hybrids (particularly plug-in hybrids) have become the dominant growth segment of the global "EV market," and these vehicles actually use catalytic converters, requiring Pd. Critically, plug-in hybrids require palladium at rates comparable to conventional gasoline vehicles. Actually, they often consume more.
China's auto market tells the story in pretty stark fashion. PHEVs now lead total monthly sales, surpassing 60% of the market in 2026, with BYD at the center of it (PHEVs have grown from 11.6% to over 37% of its total export mix). Chinese PHEV exports to Europe grew more than 700% year-over-year, with Spain, the UK, and Belgium each posting volume increases of multi-hundred to over 1,000%. Emerging markets in the UAE, Southeast Asia, and South America are seeing comparable growth.
Three forces are driving this: 1) range anxiety in markets where charging infrastructure remains incomplete; 2) EU anti-subsidy tariffs on Chinese BEVs (PHEVs are exempt) that make PHEVs the price-competitive alternative while BYD builds factories in Hungary and Turkey; and 3) platforms like BYD's DM 5.0, which delivers over 2,000 km (about 1,200 miles) of combined range.
The Iran War adds an underappreciated accelerant: spiking oil prices and energy supply uncertainty have pushed consumers toward PHEVs as the practical shift away from fuel dependency. They also provide a hedge against grid failures and other electricity supply disruptions. Those, as we know, are becoming increasingly common.
It's also worth noting that PHEVs are taking market share from Tesla. As The Financial Times reported last week, 21% TSLA owners are trading in their "Musk-mobiles" for hybrids.
Supply: The Deficit Most Investors Seem to be Missing
Global Pd supply has been in a persistent deficit for 14 consecutive years. The 2023 deficit was 0.9 million ounces; 2024 was 0.5 million ounces. An expected 2026 surplus has been repeatedly pushed back as supply tightens. The Lac des Iles mine in Ontario ceased commercial production mid-2026, removing one of the few significant non-Russian, non-South African sources.
Recycling supply has shrunk rather than grown: U.S. vehicles now average a record 12.6 years as owners delay scrappage, and recycling supply fell approximately 700,000 ounces between 2022 and 2024, about 25% of total reprocessed availability and around 10% of total palladium supply. Russia's Nornickel controls approximately 40% of global primary supply, while South Africa represents approximately 35%. Western sanctions have thus far exempted palladium under automotive industry lobbying pressure, but Montana lawmakers are actively pushing the White House for harsher restrictions. Any escalation would be an acute supply shock not remotely priced into the current $1,300 spot price.
The Technical Signal
Pd essentially doubled in 2025, handsomely rewarding Haymaker readers who acquired it in 2024 as a result of our positive analysis. Late last year, we suggested holding off on trimming due to a brief, but sharp, sell-off. Pd did, indeed, vigorously rebound early this year, giving readers who held it a chance to book extremely lush gains. However, like nearly all important commodities, including gold and silver, it entered a deep corrective phase within weeks of the aforementioned rebound. This undoubtedly has shaken out most of those who simply chased the momentum and are not believers in the structurally bullish fundamental story. The Hormuz-related risk-off sentiment in commodities also pressured Pd along with its peer group.
Sell-offs of this magnitude are common with metals and they tend to drive out the hot money, creating opportunities for those who are taking the long-term view. We believe that's precisely what's happened in 2026. On the encouraging technical side, Pd has held around its initial breakout point from last year; the less upbeat aspect is that it remains well below its 200-day moving average (the yellow line). However, the steep downtrend it's been in for most of 2025 has been broken.
Five-Year Price Chart (prior overhead resistance and 2026 downtrend — green diagonal line — displayed) [Bloomberg]
Let's Argue the Other Side
If you've been a palladium bull over the last few years, there's a pretty good chance you've been burned, as in third-degree burned. The metal hit $3,430 in March 2022, then collapsed approximately 70% as worst-case Russia sanctions failed to materialize and the EV bear narrative returned. After that, it took off like one of Elon Musk's rockets. The reality is most investors struggle with this type of volatility, particularly those of a trend-following disposition. Further, the perception of the EV risk has proven durable, exacerbated by the confusing manner in which many sources report EV sales by including plug-in hybrids in the total. As we've seen, PHEVs are where the truly explosive growth is occurring.
Another negative is that European regulation is moving toward ICE bans in the 2030s (a development we seriously doubt for practical reasons; ICEs still represent around 95% of the existing global vehicle fleet). Platinum-for-palladium substitution is another risk: at higher palladium prices, automakers have economic incentive to reformulate catalyst systems toward platinum, and they have done so previously. At the current palladium/platinum ratio of approximately 0.70x the pressure is limited, but a strong recovery could reintroduce it. Of course, platinum prices could also soar, as they did last year, an outcome we believe is plausible, even probable.
The Bottom Line
We doubt Pd's struggles this year represent a fundamental deterioration. The supply deficit has not reversed and the Lac des Iles closure has removed more supply since the highs, not added it. The hybrid demand argument has, if anything, strengthened, as the China data, exemplified by BYD, continues to accumulate.
We have seen this movie before; it's the setup we identified in 2024. We believe the current correction has created another excellent accumulation opportunity within what we believe is a long-term uptrend. The technical confirmation is there, too: the recent downtrend from the February highs has been broken. When a physically constrained commodity with a persistent structural deficit breaks a near-term downtrend, the prior trend has historically tended to regain its momentum.
With PALL, we're buying a physically scarce metal in persistent deficit since 2012, produced predominantly in two politically charged geographies, and with a demand structure the consensus has systematically underestimated. We're adding to the position at a price 1/3 below its February highs at a time when there is a misperception that pure EVs are the next-generation automotive technology to embrace.
As discussed above, the consensus seems oblivious to the fact that hybrids are also big consumers of Pd. In other words, it seems to us that the market has a double blindspot regarding palladium. PALL, the physically backed ETF, has no counterparty risk, and is a convenient way to hold this key metal. We believe this year's shakeout creates a compelling risk/reward for investors who understand that the EV transition is moving through hybrids, not past them, and that palladium supply is not growing to meet it.
We are reiterating PALL as a Buy.
The Haymaker Team
**We were intending to include an endorsement of the world's largest palladium producer, SBSW, which we previously brought to your attention as a high-risk play on this critical metal in May 2024. (We suggested profit-taking on it last December.) However, as we were preparing to write this note, it began a ripping rally and is now up 15% this week alone. We will keep an eye on it and advise if it settles back.