Palladium is it the next Platinum ?

The precious metals are taking a breather at the moment pulling back off their highs, Palladium is no exception, having reached a 6 year high recently of $580 an ounce, it has now pulled back by over $100 an ounce.

The long term outlook for the metal however still looks promising and since it is not as high profile as Gold and Platinum may also offer some real potential in the mid to long term.One of the major countries that mines Palladium is South Africa.The recent problems regarding power cuts in the country have had an impact in the mining of Palladium, South Africa accounts for about 30% of the worlds production of Palladium so any disruptions to the supply here have a major impact on the price.

The power situation in South Africa is still fragile and any further disruptions would certainly cause another spike in the price, power issues aside, there are other fundamental issues which also give support to the view that Palladium is likely to go higher in the medium term.The recent run up in Platinum is a key factor here with the record prices seen recently making Palladium an attractive option for the autocatalyst market as well as the jewellery market.With the increasing purchase of cars in the emerging markets such as China and India then the demand for Palladium to be used in catalytic converters is only likely to increase .

 

The other major supplier of Palladium is Russia, in recent years they have been keeping the market well supplied but lately these supplies have been slowing ,adding further constraints into the supply chain, there are some who believe that the Russian supplies are starting to run out if that is the case then this will be another reason for Palladium to start to move higher. The increasing interest in Precious Metals is also likely to create demand as people look to other metals beyond Gold as the fear of inflation and a sinking dollar add to the safe haven status of Precious Metals.

 

The best way to take advantage of buying Palladium is via the London traded ETF  (PHPD), it is also possible to gain exposure to Palladium via the ETF (PHPP) which gives exposure to all 4 metals, Gold, Silver, Platinum and Palladium.I added some PHPD to my portfolio today at $48.77 as well as some more of the Silver ETF (SLV) .A chart of the recent prices showing the latest pullback is below.I think this pullback may be a good buying opportunity for anyone who believes in the metals longer term.

 

 

 

 

 

Best Wishes

 

Alan

 

Technorati Tags: Gold,Silver ETF,Precious Metals ETF,Platinum,Palladium

Visa in Record IPO, Goldman and Lehman Results calm Markets

The Credit card company Visa (V)  set a record yesterday for the biggest-ever initial public offering (IPO) in U.S. history, bringing in an estimated $17.3 billion. The company offered 406 million shares at $44 per share, . The company will begin trading on the New York Stock Exchange under the ticker symbol V. Goldman Sachs and Lehman reported results yesterday that beat Market expectations but were substantially down on previous quarters reflecting the challenges in the market currently but since expectations were for a lot worse this had the impact of assisting the markets to another 400 point upside yesterday.The Fed helped hugely  cutting rates by a huge 0.75% ,this was still below some market expectations of a 1 % cut, the market however rallied on the news.Today we are seeing numerous statements from the likes of Morgan Stanley (MMS) and Goldman Sachs (GS) stating that they took advantage of the Fed discount window, bearing in mind the secret nature of these institutions this can only be seen as blatant PR to try to remove the stigma that would be associated with people finding out that Banks are in need of capital.The thought no doubt being that if the likes of Goldman and Morgan Stanley are using it then it doesn't mean there is a problem. On the contrary my view is that if they did indeed use the window it just goes to show the depth of the problem.

 

After earlier appearing to probably open to the downside the markets  opened slightly to the upside although at the time of writing they are back in negative territory.Rumours in the UK that HBOS(HBOS-LSE) are having liquidity problems-(which they have denied )are keeping the fear in the markets. The dollar is stronger and this is having a negative impact on Gold and Silver, with April Gold futures off 45 points currently . If we see Gold down around the $900 mark then I may consider adding  ore to my portfolio. Those of you who read my article on Silver yesterday (Should I buy Silver or Gold ? ) will note that Silver is holding up much better only off 0.13 at $19.71 for the June Futures.

I own both Gold and Silver but as I said yesterday if I was only looking to buy one I believe that Silver has the most catching up to do and that would be the one that I would favour I would use the Silver ETF (SLV) and look to leg in on pullbacks.

 

 

Best Wishes

 

 

Alan

 

Technorati Tags: Fed,Silver ETF,Goldman Sachs,Morgan Stanley,Lehman,Gold,Visa

Should I buy Silver or Gold ?

Should I buy Silver or Gold if I want to invest in precious Metals or hedge against inflation ? It is an excellent question and one that is often asked.Gold usually always seem to  hog the limelight when it comes to investing in precious metals but does it deserve the accolade. Over the last few years both metals have performed very well with Silver being down near the $5 mark not many years ago and Gold was down to around $250 when famously Gordon Brown the UK prime minister sold a large portion of the UK's Gold reserves in one of his early acts as Chancellor. Between 1999 and 2002 he sold around 400 tons of the UK reserves and lost the UK around  £2 billion pounds in the process-"Way to go Gordy!!!  Anyone living in the UK or following his progress  since will I am sure be well aware that it has been all downhill from that master stroke of financial genius-however this is not a political blog so back to the matter in hand.

Since these lows Gold has outperformed Silver  and the ratio of the price of Gold to Silver has historically always tended to revert back to an average of around 16:1. Sure there have been historical extremes with the ratio being as low as 6:1 back in 1551 and as high as 100:1 in the 1940's and  in 1991. Historically though it has hovered for a lot of the time between 14 and 16:1. Currently the ratio is around 50:1 which is still at the high end and would indicate that Silver is undervalued in comparison to Gold. At the current price of approx. $1000 per ounce for Gold at a 16:1 ratio silver would be priced at $62.5 per ounce over 300% higher than its current price of $20.

 

My own personal perspective is that Silver is likely to catch up Gold, maybe not to the 16:1 ration but I think it may have further to run than gold will in the short term. MY favourite way to invest in Silver is the Silver ETF (SLV). In the short term I think we could see resistance at the $25-$26 mark but if we break through that level we may see it taking off.

 

 

Best Wishes

 

 

Alan

 

Technorati Tags: Silver,Gold,Silver ETF