A 10-Year Anniversary Boost for Palladium?

When I was ring-shopping over a decade ago, my entry-level salary and my selective thrift helped me rule out a platinum band.

My tendency to go with trends helped me rule out yellow gold.

And my hankering for being different helped me rule out white gold.

Scott Kay and my (then) short time following the precious metals markets helped me choose a palladium engagement ring.

That’s right — my wife and I rock Scott Kay palladium wedding rings. When I bought them in 2006, I was under the impression that palladium would be a good long-term investment.

Not that we’d ever have any reason of liquidating the assets symbolic of our marriage. It’s just that everyone likes getting a deal, right?!

Well, I am thankful that this June my wife and I, God willing, get to celebrate our 10th wedding anniversary. I’m also thankful she hasn’t asked me to upgrade her diamond. Maybe because she still has faith in palladium prices going up!

Indeed, is our 10-year anniversary set to give palladium prices a boost?

From its low in January 2016 to its high in January of this year, palladium prices have risen more than 70%!

This knocked the socks off silver and gold, which faded in the second half of last year.

Palladium got a boost from the industrial sector, since far more people use it for catalytic converters in their cars than for wedding rings.

But palladium outpaced platinum, too.

Part of the reason for rising prices, aside from hopes that the industrial sector would improve in 2016, was an expected palladium supply deficit for 2016 and 2017.

One investment outfit, Metals Focus, forecasts a 17% increase in demand for palladium by 2020, compared to last year’s levels.

It’s hard to ignore that imbalance between supply and demand. But after a one-year 75% appreciation in palladium, I have to ask:

Are the Fundamentals Priced In?

Certainly, the fundamentals are priced in to some extent. But that doesn’t mean palladium’s uptrend doesn’t have legs.

A look further back at palladium prices reveals that last year’s rally has barely even retraced the previous year’s plunge.

The three-wave (A-B-C) expanding wedge pattern I’ve drawn on that monthly charge could resolve itself with palladium prices above $1,000 per ounce.

But still, after a 75% rally, is now a good time to get in?

For clues on timing, I like to look at the CFTC’s Commitments of Traders report that shows how futures traders are betting.

For palladium, as you might imagine, the large speculators are extremely bullish … even and especially relative to recent extremes.

When large speculators are extremely bullish, the underlying price trend is ripe for a reversal.

This to me suggests we should wait to get in on what is forecast to be a bright future for palladium. (And as I’ve shown you before, you don’t want to buy when everyone else is already on that bandwagon.)

The future for palladium, however, is especially bright for two reasons: if global economic growth continues to show signs of improvement, and if President Trump’s infrastructure proposal becomes more than just words.

Not to mention, Trump’s promised revival of fossil fuels bodes well for palladium too … if it means growth in the electric vehicle industry slows.

How Do I Play Palladium?

If you’re not tapped into the futures market, you’re probably wondering how to even play palladium when it’s time.

There are palladium ETFs including the ETFS Physical Palladium Shares (PALL) and the Sprott Physical Platinum and Palladium Trust (SPPP).

PALL is the better pure play on the price of palladium, but SPPP is a good proxy as well.

PALL (blue line) is up 51.4% and SPPP is up 33.7% year-over-year.

And there is one U.S.-listed company that has been in play since I first started following the metals market …

Stillwater Mining (SWC) is a U.S.-based producer of palladium. Stillwater also produces platinum. But Sibanye Gold (SBGL) recently launched a bid and looks set to acquire Stillwater.

Sibanye (top orange line) is up 26.3% and Stillwater is up 6% in just the first five weeks of this year.

So going forward, if you want stock exposure listed in the U.S., you’ll have to look at SBGL, which currently specializes in gold and platinum production.

SBGL does not look like a bad buy at current levels (just under $9 per share). It more tracks the price of gold than anything else. But that, of course, changes the purity of this trade … pun intended.

I remember the price of palladium dropped a good deal after I purchased our rings in July 2006. Then the price of palladium was about $330 an ounce. Today, it’s $760, a cool 230% increase in value.

Happy decade anniversary, Honey — we’re going to sell our rings this year and switch to stainless steel!

Do right,
JR Crooks

Your thoughts on “A 10-Year Anniversary Boost for Palladium?”

  1. Hi Brad,

    The real issue here is are the Banking Elite co-opting Trump without him realizing it??? By de-regulating the financial industry, it may sound very good to Trump, however, with All the MASSIVE DEBT ALREADY drowning the world, it is hard to imagine, lowering interest rates and relaxing financial regulations will lead to a booming economy when we know beyond a shadow of a doubt that this is EXACTLY what lead to the sub-prime/Alt-A real estate and CDS Derivative disaster that lead to the great recession back in 2007/8!!! Not sure how much Trump realizes this. The DEBT CAKE is ALREADY BAKED!!!

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“JR” specializes in trading commodities, currencies and options. He has spent nearly 10 years analyzing financial markets and writing about global economics. JR honed his trading techniques and global-macro worldview alongside his father, Jack Crooks, at Black Swan Capital. JR also…