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| Palladium (Photo credit: allogo) |
Chicago, May.7, hot stocks .- This may be the best time in more than a decade to invest in palladium. Normally known for its volatility, the white metal is about to enter a period unlike anything the precious metals sector has ever seen. Most folks don't know know it, but palladium is 30 times more rare than gold. And worse yet, 80% of the globe's supply comes from just two countries - South Africa and Russia.
The supply situation is a mess... and it's about to get much worse.
In Africa, the problem is simple. Mines lose huge amounts of money each year pulling palladium out of the ground. An overreaching government has made it all but impossible to modernize the mining process.
Machines steal jobs... and jobs are votes. The South African government has a stranglehold on the industry and it's not about to let it loose anytime soon.
But the real story comes from our not-so-friendly allies in Russia - the world's top palladium producer.
Secrets Revealed
For decades, Russia has kept a strategic palladium stockpile. But the amount of metal in the pile is a state secret. Until recently, the market had no idea how much metal Russia owns.
But now we're getting some clues. And it looks like Russia is desperate.
The amount of palladium the country has released from its stockpile is on the decline. In 2010, it sent a million ounces to the market. In 2011... just 775,000 ounces.
And in 2012... Russia released a paltry 250,000 ounces' worth of its so-called stockpile. It was worth a mere 3% of the global supply.
This year, our sources say the country will send no more than 100,000 stockpiled ounces to the market.
In other words, state stockpiles are exhausted.
Worse, palladium production in Russian mines seems to have peaked. Despite a double-digit rise in demand, mine output dropped by nearly 5% last year and ore grades in critical mines have dropped.
It's created the largest palladium shortage in more than a decade.
The timing could not be worse. The supply side of the equation is eroding just as the demand side is surging ahead.
Tapping Our Expert Network
If you've been to an Investment U conference, you've likely heard from one of the world's top palladium experts, Rick Rule. He's a great friend of the The Oxford Club and he just happens to be part of a group that recently bought $280 million worth of platinum and palladium.
"All those things that are true about gold and silver are also true about platinum," Rick said during a recent speech. "But there are several important differences about platinum and palladium that I believe, in the near term - one or two years - make them probably superior investments to gold and silver."
The first, I already outlined. Palladium supply is on the ropes.
The other big difference between palladium and more "typical" precious metals like gold and silver is the idea demand is soaring.
Palladium is a key piece of the long-term fight against smog. The metal acts as a catalyst that turns dangerous exhaust gasses into neutral chemical compounds. There is no known substitute for the metal.
Demand for palladium in autocatalysts hit an all-time high last year... and is expected to grow another 24% this year.
Again, that automotive demand is a key difference between palladium and gold. We actually use the stuff.
But we hoard gold. As Rick likes to say, we take it out of one hole in the ground and we put it in another.
"We do something different with platinum and palladium," Rick says. "We take it out of a hole and we burn it. It either goes out of a tail pipe or up an exhaust pipe or it gets turned into jewelry. It is no longer supply."
That's critical.
The global supply of palladium is shrinking... fast. And at the same time, we're using (you could even call it destroying) the metal at a record pace.
History shows us there's only one thing that can happen when the equation looks like this. Prices must rise.
The Best is Getting Better
We've already seen it. Palladium has been the best-performing precious metals over the last half decade.
And in 2012... Russia released a paltry 250,000 ounces' worth of its so-called stockpile. It was worth a mere 3% of the global supply.
This year, our sources say the country will send no more than 100,000 stockpiled ounces to the market.
In other words, state stockpiles are exhausted.
Worse, palladium production in Russian mines seems to have peaked. Despite a double-digit rise in demand, mine output dropped by nearly 5% last year and ore grades in critical mines have dropped.
It's created the largest palladium shortage in more than a decade.
The timing could not be worse. The supply side of the equation is eroding just as the demand side is surging ahead.
Tapping Our Expert Network
If you've been to an Investment U conference, you've likely heard from one of the world's top palladium experts, Rick Rule. He's a great friend of the The Oxford Club and he just happens to be part of a group that recently bought $280 million worth of platinum and palladium.
"All those things that are true about gold and silver are also true about platinum," Rick said during a recent speech. "But there are several important differences about platinum and palladium that I believe, in the near term - one or two years - make them probably superior investments to gold and silver."
The first, I already outlined. Palladium supply is on the ropes.
The other big difference between palladium and more "typical" precious metals like gold and silver is the idea demand is soaring.
Palladium is a key piece of the long-term fight against smog. The metal acts as a catalyst that turns dangerous exhaust gasses into neutral chemical compounds. There is no known substitute for the metal.
Demand for palladium in autocatalysts hit an all-time high last year... and is expected to grow another 24% this year.
Again, that automotive demand is a key difference between palladium and gold. We actually use the stuff.
But we hoard gold. As Rick likes to say, we take it out of one hole in the ground and we put it in another.
"We do something different with platinum and palladium," Rick says. "We take it out of a hole and we burn it. It either goes out of a tail pipe or up an exhaust pipe or it gets turned into jewelry. It is no longer supply."
That's critical.
The global supply of palladium is shrinking... fast. And at the same time, we're using (you could even call it destroying) the metal at a record pace.
History shows us there's only one thing that can happen when the equation looks like this. Prices must rise.
The Best is Getting Better
We've already seen it. Palladium has been the best-performing precious metals over the last half decade.
Because of the hugely imbalanced supply-and-demand equation, the price of palladium is likely to shoot significantly higher in the next few years.
To prove it, we turn to one final piece of evidence - the launch of a fresh cartel.
In late March, South Africa and Russia (again, the two countries that control some 80% of the metal's production) announced a plan to work in coordination to control the market. Their goal is simple. Control supply, put a floor under prices and, most important, add a premium to current palladium prices.
The experts have dubbed it the OPEC of palladium.
It's a move that combines the strategic strength of the two countries in a way that's eerily similar to how the world's top oil producers teamed up to shake the volatility out of the oil sector and create some of the world's wealthiest countries.
If the cartel gains strength, it has the potential to scratch the infamous volatility from the palladium market and send price surging higher.
We have not seen an opportunity like this from the precious metals market in more than a decade. ...
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