palladium

Commodity Price Cycle Bringing These Two Metals to the Forefront

By Sasha Cekerevac for Investment Contrarians | Apr 8, 2013

Commodity Price Cycle Bringing These Two Metals The U.S. economy is certainly not running at 100% capacity, but one sector that is operating at levels not seen since before the financial crisis is the automotive industry. In March, automotive sales increased substantially to an annualized rate of 15.3 million vehicles per year, compared to 14.1 million vehicles this time last year. (Source: Bennett, J., “March U.S. New Car Sales Jump,” Wall Street Journal, April 2, 2013.)

American carmakers contributed with substantial increases, including General Motors Company (NYSE/GM), reporting a 6.4% year-over-year increase in March, and Ford Motor Company (NYSE/F), reporting a 5.7% year-over-year increase in March.

Two derivatives of the strong automotive sector are the precious metals platinum and palladium. Generally speaking, platinum is used more for diesel engines, while palladium is used more often in gasoline engines. The increase in gasoline engines should, on the margin, increase demand for palladium versus platinum. With European vehicle sales slow, this should reduce demand for diesel engines.

One mistake many new investors make is investing with an all-or-nothing mentality. For example, an investor might be bullish on all precious metals, irrespective of the fact that certain commodities might be better investments than others in the precious metals sector.

Recently, the Chairman and CEO of Stillwater Mining Company (NYSE/SWC), Francis McAllister, stated that he believes it is highly probable that palladium will increase in price relative to platinum. Currently, palladium trades at approximately 48% of the price of platinum, up from 30% in 2003. McAllister believes palladium will rise to 65% of the value of platinum. (Source: Hill, L., “Stillwater CEO Sees Palladium Outperforming Platinum,” Bloomberg, March 21, 2013, last … Read More

What Are the Two Hottest Precious Metals? Hint: Gold Isn’t One of Them

By Sasha Cekerevac for Investment Contrarians | Feb 7, 2013

What-Are-the-Two-Hottest-Precious-Metals Many investors in gold mining stocks have been disappointed over the past few months, as their shares have languished. Since November’s low, gold has gone down slightly, currently trading at $1,665 an ounce. Obviously, mining stocks need the commodity to increase in price for their shares to appreciate.

However, there are two precious metals that have seen a spectacular rise in prices since November: platinum and palladium.

Platinum was trading at approximately $1,545 in early November; now it’s just less than $1,700 an ounce, up 10%. Palladium has outperformed these other precious metals, as it was trading at $590.00 an ounce in early November, and it’s now at $750.00, up more than 28%!

When it comes to investing in mining stocks involved in extracting precious metals, it’s crucial to understand the underlying fundamentals of the commodity market.

Obviously, the two main determinants of price for precious metals are supply and demand. The precious metals of palladium and platinum are heavily used in the construction of catalytic converters. As many of you are aware, last year was an extremely strong year for car sales in many parts of the world. This is expected to continue through 2013.

While high-priced precious metals are causing a decline in jewelry demand, the large demand for automobile sales appears to be more than enough to compensate for any slack in the market. With interest rates so low in America, I don’t see a significant move up over the next six to 10 months, and this will continue to drive strong automobile sales in 2013.

According to automotive market research provider LMC Automotive Limited, in 2012, … Read More