LONDON (Commodity Online): Even as the world is going gaga over India’s purchase of 200 tonne International Monetary Fund (IMF) gold, there are market analysts who wish to bank on some other metals also.
An article appeared in Wealth Daily said that palladium has some unique attributes that set it apart from gold, silver, and platinum. And the article recommends that if you want to have a diversified portfolio of precious metals, investing in palladium will be a very good choice.
However, prices for palladium are quite volatile, and fluctuations are more dependent on industrial demand than metals like gold, where industrial use is considered a secondary market mover by many investors, said the Wealth Daily report.
In 2001, the price of palladium peaked at over $1,100 per ounce. It currently trades around $320. A drop like that will pique the interest of contrarian investors.
Palladium is a more speculative play, and therefore research and risk tolerance are prerequisites to investing.
The report said palladium is a member of the platinum metals group and it has many industrial uses. It is one among the riskier metals as an investment class, but the potential upside is great. As the world continues to print money in an attempt to stimulate economies, palladium could benefit from both increased industrial demand and inflation.
The primary industrial use of palladium is in the manufacture of catalytic converters (devices that clean automotive exhaust). This unique metal converts harmful gases like carbon monoxide into more benign ones like carbon dioxide. The decline in car sales is partially to blame for the fall in palladium prices. But with governments artificially stimulating auto-sales around the globe, palladium prices have rebounded with demand.
Palladium is also widely used in the jewelry market. It’s an essential ingredient of white gold and is a cheaper alternative to platinum. Palladium is very similar to platinum, with the main difference being that palladium is a bit less dense. It is used in fine jewelry and is starting to replace its more expensive cousin as the base metal in engagement rings and other products. It’s easy to see why jewelry makers and consumers like palladium: It sells for around $320/ounce, compared to platinum at $1335/ounce.
Palladium is also widely used in the fields of electronics, dentistry, and medicine. Palladium-containing components are used in virtually every type of electronic device, from basic consumer products to complex military hardware. Although each component contains only a fraction of a gram of metal, the sheer volume of units produced results in significant consumption of palladium. The largest area of palladium use in the electronics sector is in multi-layer ceramic (chip) capacitors (MLCC). Smaller amounts of palladium are used in conductive tracks in hybrid integrated circuits (HIC) and for plating connectors and lead frames.
Coins or bars are the most common ways to invest in this metal. The Royal Canadian Mint makes beautiful .9995% pure palladium coins that are legal Canadian tender. But they're pretty hard to find these days. A more accessible (and cheaper) option is palladium bars from reputable mints like Pamp Suisse.
There are few pure plays in the palladium mining world, so investing via common stock is more difficult than gold or silver. The biggest player in the US is Stillwater Mining. They operate a large mine in Montana, which is one of only three large-scale production sites in the world. North American Palladium is another relatively pure play, though they are much smaller and more speculative than Stillwater.
Some of the most productive palladium mines in the world are located in Russia. And their government has not been very forthcoming about levels of production or stock. Some people think Russia’s stockpile of the metal is more sizable than the market has priced in, and that it may continue dumping metal on the market to generate cash during a lull in oil prices.
However, it is in Russia’s best interest not to release too much metal at once into the market, to ensure prices stay at profitable levels. And Russia doesn’t have a monopoly on palladium by any means — there are large mines operating in North America and South Africa, as well. But Russia’s dominant status is a factor to consider when investing.
Palladium had a nice run over the last year, and it has more room to run. However, it may be prudent to wait for a pullback to the $280-$300 level. If the dollar’s rally continues for a few more weeks, that should provide a great opportunity to scoop some up.
(Courtesy Wealth Daily)
