Palladium as an alternative investment to silver/gold

[uris]

Was speaking to my broker today and he mentioned Palladium. So I went to do some research on Palladium .

Previous historical high was $1.1k USD in 2001. There is still an upside of 37% before factoring inflation. Silver still have a higher upside. However, do note that the previous high was triggered by a delay and disruption on the supply of Palladium due to Russia, the biggest producer of Palladium at around 40%, due to political reasons. SA supplies the other 40% or so and both of them add together to around 80% of the global supply

Apparently, Palladium is a platinum substitute. Although deem a precious metal, it is used mainly in catalytic converters (over half of the available supply). One in four goods manufactured today either contain platinum group metals or the platinum group metals play a key role during their manufacturing process. It is also used in a lesser degree, as a platinum substitute for jewelery and in electronics (multilayer ceramic capacitor, plating, soldering).

Catalytic converters are used mainly in automobile vehicles. China, the largest car market in the world, has increased auto sales by 39.0% in the January-August 2010 period to 11.6 million units. (quoted from http://seekingalpha.com/article/225803- ... upply-down)

Interested, I went to do more research on Palladium. You can get some information of the Palladium supply and demand at http://minerals.usgs.gov/minerals/pubs/ ... /platinum/

The Palladium supply has been dropping since 2006. It was going up steady prior to that. Of particular note is that Russia, the biggest supplier, has been reducing the supply for years. Articles online stated that their Palladium reserves, which they have been selling from, is nearly depleted.

New technology also have diesel vehicles able to use 25% of palladium as a substitute for platinum. As the supply and price of palladium is larger than platinum, and with demand for platinum as jewelery, further demand is expected to rise.

From the TA point of view, palladium crossed over the 200day MA in Apr/May 09, nearly touch the 200day MA again in Jun/Jul 10. Unlike silver, the correction has been minimal. Currently at $783 vs a max of $1100 (upside of around 40%) and a downside low of around $180. (quite similar to silver low of $7 and height of $50 in 1979-1980). Palladium price during 1980 monthly average is only around $271 USD.

IMHO, the downside risk is higher than Silver. My worry yet also my point is that the main supply of Palladium is in automobiles. Should the economy do well and China continues to grow, Palladium should become more pricey (more so with QE2) but if a recession occur as per in 2008, the demand will plunge due as not many people buy cars in a recession. Gold instead, is viewed as a safe haven in a recession and prices seldom crash in a recession (especially if the threat of hyper inflation is looming). As per what Dennis has taught, we should diversify our portfolio in a way that we can make money in any situation. Buying a metal that follows the boom and bust cycle does not seems to be a smart move...

What are your thoughts about Palladium? I hope my insight helps. Palladium actually seems very attractive when I first looked at it but further digging and thinking had me worried.

[Dennis Ng]

Was speaking to my broker today and he mentioned Palladium. So I went to do some research on Palladium .

Previous historical high was $1.1k USD in 2001. There is still an upside of 37% before factoring inflation. Silver still have a higher upside. However, do note that the previous high was triggered by a delay and disruption on the supply of Palladium due to Russia, the biggest producer of Palladium at around 40%, due to political reasons. SA supplies the other 40% or so and both of them add together to around 80% of the global supply

Apparently, Palladium is a platinum substitute. Although deem a precious metal, it is used mainly in catalytic converters (over half of the available supply). One in four goods manufactured today either contain platinum group metals or the platinum group metals play a key role during their manufacturing process. It is also used in a lesser degree, as a platinum substitute for jewelery and in electronics (multilayer ceramic capacitor, plating, soldering).

Catalytic converters are used mainly in automobile vehicles. China, the largest car market in the world, has increased auto sales by 39.0% in the January-August 2010 period to 11.6 million units. (quoted from http://seekingalpha.com/article/225803- ... upply-down)

Interested, I went to do more research on Palladium. You can get some information of the Palladium supply and demand at http://minerals.usgs.gov/minerals/pubs/ ... /platinum/

The Palladium supply has been dropping since 2006. It was going up steady prior to that. Of particular note is that Russia, the biggest supplier, has been reducing the supply for years. Articles online stated that their Palladium reserves, which they have been selling from, is nearly depleted.

New technology also have diesel vehicles able to use 25% of palladium as a substitute for platinum. As the supply and price of palladium is larger than platinum, and with demand for platinum as jewelery, further demand is expected to rise.

From the TA point of view, palladium crossed over the 200day MA in Apr/May 09, nearly touch the 200day MA again in Jun/Jul 10. Unlike silver, the correction has been minimal. Currently at $783 vs a max of $1100 (upside of around 40%) and a downside low of around $180. (quite similar to silver low of $7 and height of $50 in 1979-1980). Palladium price during 1980 monthly average is only around $271 USD.

IMHO, the downside risk is higher than Silver. My worry yet also my point is that the main supply of Palladium is in automobiles. Should the economy do well and China continues to grow, Palladium should become more pricey (more so with QE2) but if a recession occur as per in 2008, the demand will plunge due as not many people buy cars in a recession. Gold instead, is viewed as a safe haven in a recession and prices seldom crash in a recession (especially if the threat of hyper inflation is looming). As per what Dennis has taught, we should diversify our portfolio in a way that we can make money in any situation. Buying a metal that follows the boom and bust cycle does not seems to be a smart move...

What are your thoughts about Palladium? I hope my insight helps. Palladium actually seems very attractive when I first looked at it but further digging and thinking had me worried.

I don't bother about other metals becos most of them only have industrial uses.

Gold and Silver are different becos in the last few thousand of years, ESPECIALLY during uncertain times, it is deemed to be and used as MONEY itself.

And my Main reason of buying Gold/Silver is as "insurance" against Inflation and Economic Uncertainties, not trying to profit from any upward movement.