IBD likes platinum; not gold or silver

Platinum has outperformed gold and silver in the short-term and over the past year. That bodes well for the future of the industrial metal.

And the newspaper gives five reasons why:

  1. Platinum has outperformed gold and silver in the short-term and over the past year.
  2. Strong car sales mean higher platinum prices, particularly since 40 percent of mined platinum goes into catalytic converters.
  3. Mine strikes in South Africa have seriously dampened platinum supplies.
  4. Mining costs have out-stripped platinum prices for a lot of companies – a fact that will likely lead even more producers to cut their platinum output.
  5. Growth in China means more platinum jewelry sales.

Source: Investors.com.

Platinum more attractive than gold, famed money manager says

‘Whenever you can buy platinum at cheaper than the price of gold, it’s a pretty good idea,’ according to a famed money manager. Look for the white metal to potentially outperform gold in the near-term.

There was a rare occurrence in the precious metals markets last fall. The price of platinum slipped below the price of gold, and that prompted famed money manager Michael B. O’Higgins to sell his gold in favor of platinum.

“Whenever you can buy platinum at cheaper than the price of gold, it’s a pretty good idea,” O’Higgins said in a recent interview with Jim Puplava of Financial Sense.

In general, the price of platinum hovers about 25 percent higher than the price of gold. In some instances, the white metal has traded 2x higher than price of gold. That makes the recent price flip-flop look all the more attractive, Higgins says – especially since he sees gold going as high as $6,000 an ounce.

“(Today) people ask me, if you had to give a number, honestly, I have no idea what (gold prices are) going to do, and nobody else does, but I would guess 6,000 for both the Dow and gold at some point over the next few years. Which would imply platinum at $7,500 if the average ratio of platinum to gold were to revert.”

If nothing else, O’Higgins – the author of two influential investing books: Beating The Dow and Beating The Dow With Bonds – is putting his money where his mouth is. And his track record with those big bets is good.

O’Higgins first bought gold in 2002 when he sunk 25 percent of his cash into the yellow metal. He cashed out in September, and now he’s looking to compound those gains with platinum. Perhaps it’s time the rest of us look at the white metal, too.


How to invest in palladium

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

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


Palladium Image Source: http://images-of-elements.com/palladium.php