Palladium And Rhodium – Two Precious Metals

| March 17, 2011 | 0 Comments

I love finding great investment opportunities most people are missing.  It gives me a chance to buy in at a reasonable price.  And when the herd rushes in, I’m laughing all the way to the bank…

I recently came across just such an opportunity.  And I’m going to tell you all about it.  The opportunity involves two precious metals.  But not gold and silver… Nope.  I’m talking about palladium and rhodium.

Palladium and rhodium are two of the most precious and ultra rare metals on the planet.  Interestingly, palladium and rhodium are the only two investment grade metals found in the platinum group metals (PGM), outside of platinum itself.

Before I tell you about the investment opportunity, let me first give you a little background on these two obscure metals…

Palladium

Palladium is found in the rare minerals cooperite and polarite.  It’s primarily used to make catalytic converters found in automobiles.  In fact, over 60% of all palladium mined worldwide is used for this purpose!  It’s also used in electronics, surgical equipment, dentistry, jewelry, and watches.

Most of the world’s supply comes from just one country.  An astonishing 40% of all palladium is mined in Russia with South Africa running a close second.  The US and Canada make up the remaining supply.

Oddly enough, geological surveys show South Africa actually has the lion’s share of this metal.  The problem is they can’t get to it.  They lack the infrastructure to mine the palladium deposits.

Interestingly, palladium is often found in nickel, platinum, and gold mines.  But the bulk of palladium is found in nickel mines.  And that’s an important fact.  You see, if nickel demand slows, palladium mining slows.  This in turn lowers supply and often sends palladium prices surging higher…

So how rare is palladium?

Global production of this unique metal is roughly just 10% of silver production.  Pretty rare by any standards.  But not as rare as our next metal…

Rhodium

Like palladium, rhodium is found in platinum or nickel ores.  Considered the rarest metal on the planet, rhodium is the most precious and easily the most expensive.  Right now the bid on rhodium sits at $2,350… for just one ounce.

Rhodium is also used as a catalyst in catalytic converters.  Again, the auto industry uses the lion’s share of this metal… a whopping 87%!

In addition, white gold is often plated with a thin rhodium layer to improve its appearance and prevent tarnishing.  It’s actually rumored President Obama was buying a ring for the First Lady made from pure rhodium…

So, how do these ultra rare metals look as investments?

Both metals offer huge upside potential.  As global supply dwindles, prices can only rise.  It’s simple supply and demand.

Remember, auto industry demand for palladium and rhodium is robust and growing…

As you know, the US auto industry is in the midst of a major comeback.  Surging demand for autos should drive demand for palladium and rhodium through the roof.  And you know what that means…

Prices for these rare metals are poised to rocket higher.

While both metals offer outstanding profit potential, palladium is the better investment choice.  Rhodium is ultra rare as you’ve learned… So rare in fact, you can only purchase it as a physical holding.  Believe it or not, there are only 696,000 ounces of rhodium worldwide.

If your heart is set on owning rhodium, you can purchase it through a precious metals holding company.  In addition, you must properly store the metal.  And resale can take some time due to the illiquid nature of the metal.

I would recommend sticking to the more liquid of the two metals, palladium.

Your investment options include futures contracts, an ETF, or buying the physical metal itself.  In addition, there are a few mining companies that focus on palladium mining and recovery.

My favorite way to invest in palladium is ETFS Physical Palladium Shares (PALL).  Since it’s an ETF, we can easily get in and out when we choose.  And the performance over the past year is outstanding.  It’s up 60%, even after the recent 10% pullback caused by the natural disaster in Japan.

Here is the bottom line…

Both palladium and rhodium present a great opportunity for short and long term investment.  Short term upside is based on the auto industry resumption of palladium use.  And we’ll certainly see significant long term growth based on sheer supply and demand imbalance.

If you’re following the palladium market, you’ve seen the small pullback.

The metal price has dropped because of the natural disaster in Japan… I think the recent pullback offers an even better entry point.

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Category: Commodities

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The Dynamic Wealth Report works with a number of staff writers and guest experts who specialize in everything from penny stocks to ETFs to options trading. These guest analysts post under the 'staff writer' moniker for ease of use.

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