Platinum and Palladium: The Other Precious Metals
Source: Martin Hutchinson, Money Morning (3/28/12)
"Even gold and silver investors need to diversify, and there's a small window of opportunity to get in on platinum and palladium before prices really start to take off."
That's why investing in precious metals means more than simply buying the "barbaric relics" that have served as money in the past.
Aside from silver and gold, there are two other ways to invest in precious metals that deserve your attention - both of which have important industrial uses.
They are palladium and platinum.
And for today's investors, there's a small window of opportunity to get in on both of them before prices really start to take off.
As commodities and mining expert Peter Krauth recently explained, "soon virtually every substance vital to modern life will become enormously expensive and profitable for investors who know how to play it."
Most assuredly, palladium and platinum will follow along every step of the way.
Both are essential industrial metals-especially vital to the automobile industry.
Palladium and Platinum: The Other Precious Metals
Otherwise known as element 46, Palladium is one of the platinum group of metals which share the characteristics of being chemically inert and physically heavy.
Palladium is industrially important because of its ability to absorb up to 900 times its own weight of hydrogen gas, making it ideal for use in automobile catalytic converters.
Because of this use, its price peaked in 2000 at over $1,100 an ounce, at a time when gold was selling for around $250 an ounce. Currently its price is around $690 an ounce, which is much cheaper than platinum.
That's why the automotive market is switching back to it. As much as 25% palladium can be substituted for platinum in catalytic converters, and that proportion has been increased to 50% in the laboratory.
Platinum, element number 78, is much heavier than palladium, checking in 20 times as heavy as water.
As with palladium, its primary use is in catalytic converters, but it also has uses in jewelry and electronics.
The price of platinum has traditionally been higher than gold's, and it soared to over $2,000 an ounce in 2008; currently it trades around $1,640, or just below gold.
Naturally, with its heavy industrial use, its price tends to rise sharply whenever the automotive industry is expanding rapidly. That's exactly the case in emerging markets like China and India where economic growth has produced millions of new drivers in the last decade.
Although palladium is twice as common as gold, only 200 metric tons of palladium and platinum are produced annually, less than a tenth of annual gold production.
Palladium's principal producers are Russia and South Africa, both with about 40% of the market, while 80% of the world's platinum comes from South Africa.
For investors interested in mining companies, the principal challenge is to find companies with substantial operations outside Russia or South Africa.
Both those countries have a history of poor observance of contracts, so mines in those countries are in severe danger of having their contracts renegotiated or even suffering expropriation.
However, in both cases, interesting Western mining opportunities exist. What's more is that both palladium and platinum have metal ETFs. -Martin Hutchinson, Money Morning