Palladium!
Posted by Ray on April 14, 2010 under Main | 
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Those who read my material know that I am a bull on precious metals and have been for some time. The main reason is because over the long-term the Federal Reserve intentionally devalues the dollar, its buying power is down some 95% since 1914. The most recent reason to be bullish on commodities as a whole is because of Obama’s plan to double exports within 5 years. This is a lofty and unachievable goal unless you plan on devaluing the dollar. Based on our debt load the devaluation of our currency will happen whether we like it or not.
I have been more bullish on silver and palladium over the recent months. I started buying silver at $9/oz and palladium at about $230/oz so I have hefty gains already, but I believe this is only the beginning. With both of these metals you are playing both a global recovery, which I see happening, but not as robust as the talking heads claim, or if you believe the world is going to end. Either way, you should own these metals, perhaps wait until they selloff in the near future, but nevertheless, why wouldn’t you own them?
Silver is used in almost everything you have in your house, from your TV to your cell phone. Silver is also going to be under tremendous pressure in the near future as the global population grows and people are lifted out of poverty because everyone wants a cell phone, computer or even a mirror, yes silver is used in mirrors as it is the most reflective metal in the world. Silver is a dual purpose metal as it is used in industry and as a store of wealth. The Chinese and Japanese used a silver based currency in the 20th century along with the U.S. as a bi-metal currency. Regardless, whether you think the world is going to end, own silver, or whether you believe in a global recovery, buy silver. Surface supplies are dwindling and all the easy silver has been mined. Combine that information with a growing population and we are bound, rather soon I suspect, to have a shortage in the supply/demand curve. Silver is an easy sell.
Palladium has been on fire lately moving up from $420/oz to $545/oz as of today, it was up $25 today alone! Palladium is used as an industrial metal first, mainly in catalytic converters, but it also is used in jewelry and as a precious metal, it was only recently that this usage has grown. Palladium is also a “green metal” as it can be used in several clean energy items, hydrogen cars for example. In short, it is a cheap alternative to its bigger brother platinum. Believe it or not, palladium is rarer than platinum and the largest world supplier of palladium is Russia.
I personally believe Russia is a pretty volatile place, I think history proves that point, which means the supply of palladium can be reduced if Russia throws a temper tantrum. There is always the possibility that Russia does something we do not like, like go to full war with Chechnya or invade Georgia, the country not the state. We could also upset Russia as well by invading, say, Iran, North Korea whoever which could create tension between the U.S. and Russia which could lead to less exportation of palladium to the U.S. If that happened prices would go through the roof.
The big story with palladium is the growth of automobiles in India and China. Between the 2 countries there are over 2B people who are being lifted from poverty to the middle class. As they ascend from poverty they will want what we have, cars. This means lots of catalytic converters in lower cost cars. Ultimately this means they will use less platinum and more palladium, regardless of where it comes from. All of this is a bull case for the metal and I think it could go much higher over time.
I believe the metal will be volatile, silver as well, because of the ETF’s designed to buy both metals. These ETF’s are likely the reason we see prices climbing recently so it is tough to know if the demand for the metals is organic or artificial, for investment purposes. Eventually people will sell PALL or SLV which will cause the prices to drop and that is the time to buy, IMHO. Also, if the dollar strengthens, which is what I think will happen, prices will drop then to. However, long-term I believe both metals are the trade of the century.
I am in no rush to sell what I have and am an active buyer, even at these levels. If you do a Google search for palladium coins or bullion you will see the supply is tiny. You can get palladium bullion, but you will pay a hefty premium for it. This is because supply is so limited and, as we know, you cannot just make more natural resources so the supply is finite. The price action is very exciting to those of us holding the metal already and what I like is the media never pays attention to either metal, never palladium though. Today with a 5% rise in value, no one said a thing, but if it was gold we would hear all about it, mostly negative things and gold bug jokes.
Silver and palladium are no joke and one should consider owning them. At the very least it is diversification especially if you own PM’s already. I am sure there is a bear case out there for both these metals, but I cannot find one that is reasonable.
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