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Palladium is the Metal to Watch Right Now

Forget Gold and Silver and Keep an Eye on Palladium


Wikimedia Commons/CC BY 3.0

When you think about investing in a precious metals ETF, the first thing that comes to mind is GLD, the de facto investment vehicle for gold.  Some might go on a deeper dive and look at SLV or PPLT, the two most actively traded ETF's for silver and platinum.

But how many people would think about investing in PALL, the ETF for palladium?  Now you might be thinking, "What is palladium even used for and why would I want to invest in it?" Well, I'm glad you asked.

Palladium is a precious metal that was discovered in 1803 by William Hyde Wollaston, an English chemist.  It is named after the asteroid Pallas, a name derived from the nickname of the Greek Goddess Athena.  At one time small amounts of palladium were used to treat tuberculosis, but it had the annoying side effect of death.

Palladium is widely used in various industrial applications, the most prominent of which is in the production of catalytic converters for automobiles. In 2000, due to political reasons, the Russian supply of palladium was consistently disrupted, and Ford Motor Company, fearing a lack of supply for their cars, stockpiled a large amount of the metal at near record prices.  When prices finally began to drop in 2001 they lost almost $1 billion dollars on their "investment."

Palladium also is used in the photographic process and increasingly more often in the production of fine jewelry.

One of the most interesting things about palladium is that it is currently up over 17% year to date, while all the other precious metals are struggling.  This relative strength shows that the underlying fundamentals in palladium are strong and will likely continue to be in the near future.

As an added bonus, the chart of palladium is looking very bullish, not just in the short term but longer term as well.  For the last five years palladium has been basing in a progressively tighter range, known in technical analysis terms as a symmetrical triangle.

By taking the range of the triangle, which is about $300, and adding it to the top price of the pattern you get what is called a "measured move," or the estimate of the target price that palladium should get to before the move has to be reevaluated.  That target currently stands at $1,050, about a 25% move from current prices.

Though palladium can be bought in physical form, most commonly with Canadian Maple Leafs, and via futures, the most convenient and straightforward way to own it is through the palladium ETF PALL.  The volume on PALL is not as great as it's more well-known cousins GLD and SLV, but it still provides enough liquidity for the average investor.

PALL trades at a 1/10 value of the price of an ounce of palladium and can be bought in retirement accounts for those interested in long term investing. 

Something to note about palladium is that though it is not tied to any specific country's economic policies, it is acutely sensitive to political machinations that emanate from Russia -- and by extension, the former Eastern Bloc countries -- as it is the largest producer of palladium in the world.

And as with all investments, make sure to do your own research to determine if you are comfortable with the associated risks.

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