Skip to main content

Platinum and palladium revisited

Platinum and palladium have been on fire the past couple months, as you probably know.

We've recently highlighted platinum's surge here with some brief article mentions, but it's been a while since we covered the platinum group metals (PGMs) at length. And since platinum and palladium are probably both due for a nice short-to-medium-term pullback, you may take this post as an intermediate-term top signal!

Back in April and May of 2007, we highlighted the launch of the new platinum and palladium ETFs brought out by ETF Securities and Swiss bank ZKB. Demand for the new commodity ETFs was strong right out of the gate, and the recent upward move in the PGMs has generated more interest in these products.

Still, no platinum ETFs have been introduced in the US, a situation which is probably due to the metal's extremely tight supply and expected lobbying by industrial users against such a product.

And its not just the industrial users who would be upset by increased investment buying. It seems that platinum and palladium producers were also none too excited about the added buying and selling pressures that would result from new ETFs being launched.

With platinum currently trading at $2174 an ounce, and palladium trading at $514 an ounce, platinum commands a 4.2:1 premium over its complementary white metal. This premium for platinum over palladium has widened from a ratio of about 3:1 back in April of 2006, when we last covered the price action of the PGMs in some depth.

At that time, noting the possibilities for increased use of palladium as a substitute metal in industrial and jewelry applications, I wondered if the price disparity between the two metals might narrow in the not-too-distant future. So far, this has not been the case, as platinum still surpasses palladium in price terms, four-to-one.

However, palladium has enjoyed a remarkable run up in recent months, and its near-parabolic move towards $600 an ounce has been a boon to investors who bought in when the metal was trading between the range of $300 and $400 an ounce.

And since the price spread between the two metals persists, speculators and investors continue to focus on the future substitution value of palladium.

But speculators who bought in recent days had to be nimble or face quick losses, as palladium and platinum prices suffered sharp drops Thursday (March 6, 2008) on news that South African mines had regained power following recent power shortages. It seems that after such a sharp rise, the metals were due for a correction.

For more on the platinum group metals, and possible vehicles for speculation and investment in platinum and palladium, mining shares, and ETFs, please see the following articles. And remember the risks involved in speculating, and chasing any hot trend.

"Metals action and notes on palladium" - Finance Trends Matter.

"Got platinum/palladium?" - Finance Trends Matter.

"Platinum, Palladium are hot" - Financial Post.

"Palladium stars as investors focus on future substitution" - Mineweb.

"ZKB palladium ETF beats target, platinum lags" - Reuters.

"Palladium: the other white metal" - Seeking Alpha.

"Palladium, Platinum, Gold, and Electricity" - Financial Sense Online.

"Platinum bull run to continue for many years" - 2007 Reuters article.

Popular posts from this blog

Seth Klarman: Margin of Safety (pdf)

Welcome, readers! Signup for free email updates at the Finance Trends Newsletter . Update: PDF links removed due to DMCA notice. Please see our extensive Klarman book notes below. New visitors, please check the Finance Trends home page for all new posts. Here's something for anyone who has been trying to get a look at Seth Klarman's now famous, and out of print, 1991 investment book, Margin of Safety .  My knowledge of value investing is pretty much limited to what I've read in Ben Graham's The Intelligent Investor (the book which originally popularized the investment concept of a "Margin of Safety"), so check out the wisdom from Seth Klarman and other investing greats in our related posts below. You can also go straight to Ronald Redfield's Margin of Safety book notes .    Related posts: 1. Seth Klarman interviews and Margin of Safety notes     2. Seth Klarman: Lessons from 2008 3. Investing Lessons from Sir John Templeton 4.

Slate profiles Victor Niederhoffer

Slate's recent profile of writer/speculator, Vic Niederhoffer has been getting some attention from traders and finance types in recent days. I thought we'd take a look at it here too, to offer up some possible educational value from Vic's experiences with trading and loss. Here's an excerpt from Slate's profile of Victor Niederhoffer : " I've enjoyed getting your e-mails. It sounds like you've thought a lot about being wrong. Well, the reason you contacted me, to call a spade a spade, is that I'm sort of infamous for having made a big, notorious, terrible error not once but twice in my market career. Let's talk about those errors. The first was your investment in the Thai baht, which pretty much wiped you out when the Thai stock market crashed in 1997. I made so many errors there it's pathetic. I made one of my favorite errors: "The mouse with one hole is quickly cornered." That is key. There are certain decisions you make in li

William O'Neil Interview: How to Buy Winning Stocks

Investor's B usiness Daily founder and veteran stock trader, William O'Neil share d his trading methods and insights on buying winning stocks in an in-depth IBD radio interview. Here are some highlights from William O'Neil's interview with IBD: William O'Neil's interest in the stock market began when he started working as a young adult.  "I say many times that I didn't get that much out of college. I didn't have much interest in the stock market until I graduated from college. When I got married, I had to look out into the future and get more serious. The investment world had some appeal and that's when I started studying it. I became a stock broker after I got out of the Air Force."    He moved to Los Angeles and started work in a stock broker's office with twenty other guys. When their phone leads from ads didn't pan out, O'Neil would take the leads and drive down to visit the prospective customers in person.