Palladium ETFs are a newcomer on U.S. stock exchanges, and they could help drive up investor demand for palladium.
Since it doesn’t end up in the news very often, individual investors rarely look to palladium as an investment option in the precious metals field. That could change in the coming year as 2010’s return on palladium (+83 percent YTD) has out-paced gold (+24 percent), silver (+71 percent) and platinum (+16 percent YTD).
Why the spike in palladium?
Of the big four precious metals (gold, silver, platinum and palladium), platinum and palladium are closely tied to economic development. Since both metals are used extensively in the production of catalytic converters for automobiles, they do well when economies are expanding (think China and India). Palladium could also see increased investor demand thanks to new ETFs and plans by the U.S. Mint to start producing American Eagle palladium bullion coins.
How can I invest in palladium?
There are a handful of ways to legitimately (and fairly safely) invest in palladium:
- Buy palladium bullion coins
- Buy stock in a palladium ETF (exchange-traded fund)
- Buy stock in a palladium mining or palladium recycling company
Where can I find palladium bullion coins?
U.S. President Barack Obama signed a bill into law on Dec. 14, 2010, that would “authorize the production of palladium bullion coins” by the U.S. Mint. No word yet on when the palladium bullion coins will hit the market. Expect them to be a hot commodity, though, if for nothing else than owing to their scarcity.
After being discontinued in 1999, the Canadian Mint started producing its Palladium Maple Leaf one-ounce palladium bullion coin again in 2005. Individuals cannot purchase coins directly from the mint, but Canadian palladium bullion coins are available through coin dealers and occasionally on auction sites like eBay. Still, they’re difficult to find.
Other palladium bullion bars and coins from countries like Switzerland, China, Russia and France are available on various web sites and via coin dealers. Make sure you FULLY understand what you’re buying before you try to acquire these coins or bars.
Palladium ETFs are a newcomer on U.S. stock exchanges. There are currently two palladium ETFs on the NYSE that I’m aware of:
- ETFS Physical Palladium Shares (NYSE:PALL): A palladium ETF that looks to match movements in the palladium spot price minus fees
- ETFS White Metals Basket Trust (NYSE:WITE): A physical silver, platinum and palladium ETF that started trading on Dec. 3, 2010
Finding the best palladium stocks
Palladium mining stocks operate in a small niche. Most of the world’s palladium deposits are concentrated in just four countries: Russia, which produces 44+ percent of the world’s palladium, South Africa, which produces 40 percent, Canada, which produces 6 percent and the U.S., which produces 5 percent.
The biggest deposit in the U.S. is concentrated in the Stillwater igneous complex in Montana (incidentally the home state of Rep. Dennis Rehberg who introduced the American Eagle Palladium Bullion Coin Act of 2010). Stillwater Mining Company (NYSE:SWC) is an obvious candidate for buying a palladium stock. Stillwater’s shares are up 116 percent YTD.
Here are some palladium stock suggestions for further research as we move into 2011:
- North American Palladium Ltd. (AMEX:PAL), +89 percent YTD
- Noril’skiy nikel’ GMK OAO (PINK:NILSY), +64 percent YTD
- Anooraq Resources Corporation (AMEX:ANO), +66 percent YTD
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