(click to enlarge chart)Comments: North American Palladium's (PAL) Lac des Iles Mine is Canada's only primary producer of platinum group metals. The sell off in PAL may be nearing an end. The RSI downtrend has been broken and the selling appears to be driving PAL into a falling (bullish) wedge. A downtrend break appears imminent, followed possibly by a rally in the coming weeks to $8 or $9. Although this stock may be too volatile for investment purposes, it does provide decent trading opportunities from time to time.
Some of the bullish arguments in favor of Palladium are as follows:
- Historic Ratio: The historic ratio between Platinum and Palladium has been about 3 to 1. Currently, the ratio is 3.63 to 1. If Platinum maintains its lofty valuation, Palladium may play catch up.
- Demand: The main sources of demand for Palladium are the automobile industry, where it is used in autocatalysts, and jewelry. Although Palladium was in a supply surplus last year, the bullish argument in favor of Palladium revolves around its substitutability for other precious metals. Car manufacturers may increasingly switch from Platinum to Palladium when manufacturing autocatalysts, due to the lofty price of Platinum and, with Gold and Platinum jewelry being too expensive for many, Palladium may be a natural substitute. The latter argument makes sense to me and I can imagine Palladium soaking up a lot of the lost Gold jewelry demand if investment demand in Gold really surges. Anecdotally, I've noticed quite a lot of media attention being given to Palladium's use in jewelry recently. Have you?
- Supply: With 2/3s of the world's Palladium reserves in one country (Russia), supply disruptions are always possible and have occurred within the last few years.
Related Articles:
[http://www.assetstrategies.com/palladium/index.html]
[http://www.thestreet.com/_yahoo/pom/pomrmy/10304698.html?cm_ven=YAHOO&cm_cat=FREE&cm_ite=NA]
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