Palladium: The New Platinum

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Includes: PALDF, PALL, PGM, PPLT, PTD, PTM, SBGL
by: Ray

I am sure you are familiar with precious metals like gold, silver and platinum, but there is one more metal that gets ignored, palladium. Palladium is a member of the platinum family and is, actually, much more rare than platinum. This metal just might be one of the best options for those looking to invest in precious metals, but it is often ignored.

The metal is ignored because it is viewed as cheap, at $290 an ounce, but it is cheap for a reason: there is no demand right now. That, I believe, is about to change as automakers are looking to save money and make their products cheaper. Palladium's big brother, platinum, is used in catalytic converters to lower emissions, but at almost $1,300 an ounce it is extremely expensive. However, palladium does the same thing at 25% of the cost and it is rarer than platinum. The fact that there is a very strong possibility that automakers will dump platinum for palladium is reason enough to buy the metal. The last time this happened, palladium went to the moon.

However, the story just gets better because palladium is used for other things too. For some reason palladium can hold up to 9 times its weight in hydrogen which makes it useful for those exploring hydrogen powered cars, but its ability to lower emissions also makes it desirable for those industries looking to go green. For that reason it is a nice green play, for now, while it is cheap. Also, the major suppliers of palladium are Russia and South Africa, with Russia being the primary supplier. As you know, Russia can be hard to deal with so the supply could be cut off at anytime, making the case of ownership of the metal even stronger.

The metal is also used in jewelry, which may not excite you right now, but consider this--China has emerged from the economic slump and platinum is very popular there. As I just said though, platinum is very expensive which makes palladium, which has many of the same characteristics as platinum, attractive for its low cost. So far palladium has performed very well this year coming from a low of $185 to $290 at the moment, it was up yesterday when other metals were down which makes me think Detroit is moving in its direction now.

So, this metal is a green play, an automobile play, a jewelry play and, essentially, a recovery play which makes now a very good time to be a buyer. Last year the metal was twice as expensive, but like with all metals last year it got pummeled. The biggest problem is how do you buy this metal, there is no ETF and most people do not want to buy futures contracts. The only real way to buy it is physically, which is how I own mine, or through buying companies that manufacturer it, like Stillwater Mining (SWC).

If you want to buy the physical metal it is a bit tougher because there are only 2 forms to buy it in, the Canadian coin or the Pamp Suisse bar, both are sold in 1 ounce increments. Unfortunately, Canada does not make the coin anymore and they only had 3 years of production, 2005, 2006, 2007, and the 2007 version is considered ‘rare’ and sells for a premium. Actually all Canadian palladium coins sell for $100 premium, but the Pamp version only sells about $30 to $50 over the spot price. For the best place to buy these products go to a reputable dealer. You can get them on Ebay, but if you do not know what you are doing go to a dealer.

Like I said, I believe that the transition to palladium is on its way and I have no idea if that is a fact or not, but what I do know is I like the price action lately. I believe that if you get in and hold it long-term you could potentially do very well. It gives you inflation protection, but you do not need inflation to profit with all the alternate ways the metal could appreciate just makes this metal too good to be true, in my opinion.

Disclaimer: I do not own any of the stocks listed, nor do I have any agreement with any website listed in this article. I do own the physical metal and am actively adding to my position.