Palladium Bull Market

Palladium Bull Market: China's Secret Metal
by Jeff Clark
The Rude Awakening
Wall Street, New York
Friday, January 13, 2006

Jeff Clark discusses Palladium and what might happen in a Palladium Bull Market.

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China's Secret Metal
By Jeff Clark

Gold is grabbing all the headlines today...but palladium
may be grabbing all the headlines tomorrow. That's because
demand for this precious metal is picking up a head of
steam.

I sometimes refer to palladium as "China's secret metal"
because Chinese consumption of this rare metal has soared
in recent years. Palladium is vital to the automotive,
computer, biotech, pharmaceutical, and glass-making
industries. In fact, palladium and platinum are becoming so
valuable, the St. Louis Post Dispatch reports, that they
are become the target of thieves, who are stealing cars in
order to extract these precious metals from catalytic
converters. "Police say this particular crime is on the
rise," the Dispatch reports, "as more thieves discover the
value of the hot part and learn how to dismantle it."

If I'm right about the developing bull market in palladium,
car thefts in St. Louis could become increasingly popular.
The fundamental argument for owning palladium is growing
stronger by the day. That's because industrial demand is
growing stronger by the day. (And it probably doesn't hurt
that commodity funds are continuing to pour money into the
precious metals sector). I expect industrial demand to
continue booming, as long as the price spread between
platinum and palladium remains as wide as it is currently.

Allow me to explain.

Palladium Bill Market: Much Like Platinum

Palladium can perform many of the same industrial uses as
its sister metal, platinum. Therefore, whenever analyzing
the palladium market, it is important to pay attention to
the price relationship between these two metals. If, as is
currently the case, the platinum price strays far away from
the palladium price, certain industrial consumers will
begin using palladium instead of platinum, thereby boosting
demand for palladium.

Throughout the late 1990s, these two precious metals
tracked each other pretty closely. But in 2000, the price
of palladium spiked due to supply disruptions from Russia.
As the palladium price soared, many industries began
substituting other cheaper platinum group metals. So by the
time Russia resumed shipping palladium, industrial demand
had disappeared. The palladium price plummeted from more
than $1,000 an ounce in 2000 to less than $200 an ounce by
2003. But palladium finally started inching up again late
last year. This appears to be the start of something big. 

Today, with platinum at $1,030 per ounce and palladium at
$270 per ounce, the price differential between the two has
reached a record-wide spread. Consequently, it seems very
likely that either the price of platinum will fall, or the
price of palladium will rise. Or it might be that both
metals will rally together, but that palladium will rally
more. Whatever the case, the spread between the two seems
likely to narrow, to the benefit of palladium.

Palladium Bull Market: Stillwater Mining and North American Palladium

One way to play this trend is to buy up a few scrapped
cars, strip out the catalytic converters and extract the
palladium. But maybe that's a little too creative. A better
way to play the bull market in palladium (and in platinum)
is to invest in one of the two North American companies
engaged in mining for palladium: Stillwater Mining Company
(SWC), and North American Palladium (PAL).

Not surprisingly, the share prices of these two companies
display a remarkably close correlation to the price of
palladium.

So if we're truly in the early stages of a bull market move
for palladium, I expect we'll see the metal surpass the
$325 peak of 2004. And, I expect we'll also see the shares
of both of these companies appreciate by at least 100%.
About that time, palladium will start grabbing
headlines...and we'll start grabbing our profits.

[Joel's note: We should point out that Stillwater and North
American Palladium have both gained more than 25% since
Jeff recommended these stocks in the October issue of his
"Big Trend Report." But if the big bull market in palladium
unfolds as he anticipates, these two stocks have far to go
before the party's over. What's more, in the recent issues
of his letter Jeff identifies several other opportunities
that are just getting underway...

The Big Trend Report
http://www.isecureonline.com/Reports/BTR/EBTRG102

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Did You Notice...? 
By Kevin Kerr

I like the long-term story for palladium. But as a futures
trader, I'm much more focused on platinum. For one thing,
the platinum market is much more liquid and easier to trade
than palladium. For another, I'm very attracted to the
fundamental story for platinum.

If Justice Litle is half-right about the future demand for
diesel-powered vehicles, platinum wins big. Anglo Platinum
CEO Ralph Havenstein, recently remarked, "I do believe that
diesel is going to get its place in the sun also in the
United States. That will certainly be very good for
platinum (and also rhodium) demand going forward."

Anglo Platinum, which is majority owned by mining company
Anglo American, is the largest platinum producer in the
world. So Mr. Havenstein is rightfully excited about the
prospect of exploding demand for platinum group metals from
the global auto industry, especially when you consider that
the annual supply of newly mined platinum already falls
short of demand.

Net-net, I'd suggest gaining a little exposure to the
platinum group metals, whether through futures, options,
physical metal or shares of companies like AAUK. If the
"diesel days" are coming, as Justice predicts, platinum
will get snatched up hand over fist and $1,000 an ounce
could look like a bargain.

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And The Markets...

	Thursday	Wednesday	This week	Year-to-Date
DOW	10,962	11,043	3	2.3%
S&P	1,286	1,294	1	3.0%
NASDAQ	2,317	2,331	11	5.1%
10-year Treasury	4.41	4.46	3.00	1.00
30-year Treasury	4.59	4.63	3.00	5.00
Russell 2000	707	711	7	5.0%
Gold	$546.65	$547.75	$6.70	5.7%
Silver	$8.96	$9.01	-$0.18	1.6%
CRB	334.71	335.71	-4.76	0.9%
WTI NYMEX CRUDE	$63.92	$64.05	-$0.29	4.7%
Yen (YEN/USD)	JPY 114.27	JPY 114.16	0.16	3.1%
Dollar (USD/EUR)	$1.2034	$1.2125	119	-1.7%
Dollar (USD/GBP)	$1.7598	$1.7641	108	-2.3%