While we remained bullish on the precious metal's sector when it took a beating towards the end of 2008 to early 2009, instead of pushing gold or silver our main focus was on palladium. It was the single most ignored precious metal out there. Mass psychology dictates that when a market takes a massive beating, it makes for a good investment and is being completely overlooked by the masses; the astute investor should aggressively start building up a position. When it was trading close to its lows, we even stated that it made for a better opportunity than silver (that advantage is now over). This position appears to have paid off, as palladium has outperformed all the precious metals. From low to high, palladium tacked on over 155% making it the best-performing precious metal in the past 12–13 months. From low to high, silver tacked on 120%; and gold, from low to high, tacked on roughly 80%.
We made the following comments on Jan 5th, 2010 to our market update subscribers:
Having traded past 400 on a weekly basis, it could potentially spike to 450 before pulling back. Focusing on the short to intermediate term timeframes, palladium is now overbought, and so it is ready for a pullback. Now is not the time to open up new positions. If you have no positions wait for a strong pullback before deploying new money into this play.It subsequently traded to and surpassed the 450 mark. As palladium has mounted a very strong rally, and once the correction gathers steam, we will be in a better position to determine which precious metal will be the next top performer. A break below 420 for 3 days in a row should take it down to the 380 ranges. A weekly close below the 350–360 ranges could potentially take it down to the 280–300 ranges; this is also roughly the zone the main uptrend line runs through.
From a long-term perspective, all strong pullbacks in the precious metal's sector (gold, platinum, palladium and silver) should be viewed as buying opportunities.