Palladium: The Precious Metal Continues to Shine Brighter than the Rest

In a year expected to punish the precious metal group, which saw tremendous triple-digit gains dating back to mid-decade on the back of investor fear, one metal forgot the script: palladium. Thanks to a combination of bullish fundamental and technical phenomena, this backwater outpost of the CME has quietly produced year-to-date gains of 18% with plenty of upside to go. Gold and silver meanwhile have returned 4% and -2.6% YTD, respectively.

Primarily added to the catalytic converter in your car to absorb harmful emissions, investors in the know have also been adding palladium to their portfolios at a steady clip. Heck, South Africa launched a new palladium ETF in March. Meanwhile, interest has spiked in $PALL (the most popular palladium ETF) and speculative long positions continue to build in the futures market.

What is driving this impressive bull market? To name a handful of many reasons:

  • A multi-year supply deficit.
  • The improving economy as car sales surpass 2007 highs, at least stateside.
  • Renewed cold war tension between Russia (the world’s largest supplier) and NATO.
  • Speaking of Russia, Russian palladium flows to Switzerland (its main palladium exporting partner) rose to an 11-month high in April and still the price rose 4%.
  • A five-month long strike in South Africa (the world’s second largest supplier) with seemingly no end in sight.
  • The multi-year consolidation breakout about $750/ounce, first noted by All Star Charts.

Palladium is the type of market I love; it has all the pieces a trend follower needs: a strong bullish technical breakout, numerous bullish fundamentals and strong bullish investor sentiment.

Although Palladium has had quite a run, from a technical perspective it has much further to go, perhaps even to its all-time highs above $1,100 per ounce set in 2001. The before-mentioned cold war tensions in Ukraine may ease and the South African platinum/palladium miners may return to work, it may even hit technical resistance around the 2011 high of $865 an ounce, but I’m willing to bet it will bounce back from those temporary bearish events and climb higher.

P.S. I am long the CME futures contract for palladium, offsetting my losses from Arabica coffee I love so much 🙂

 

Where I’ve Been

It has been months, January 29 to be exact, since I last updated this blog. It’s time to explain where I’ve been and what I’ve been up to. Originally, when I accepted a new position at R/West Marketing, I planned to update this blog once a week. That has not happened and I apologize.

Transitioning back to full-time work has been rewarding but also tiring. There is only so much time I can sit in front of a computer without driving myself (and my wife) crazy. At the same time, my wife has made a job change as well. Last month she accepted an offer that has moved us from the Willamette Valley to the high desert of Central Oregon.

With my new location I’ve debated changing the name of this blog to the “High Desert Trader” to reflect my new surroundings. In the end, I’ve decided to keep it “Rip City Trader.” Although I no longer live in Portland, it will always be my hometown.

And now that we have settled into our new residence, I vow to maintain my pledge to blog at least once a week beginning now. My hope is that my once growing audience returns and we can resume the verbal scrum between bulls and bears in the world’s futures markets.

Despite the massive changes in my life these past few months, I have continued to trade with my attention squarely upon palladium. It’s a market I’ve been watching for a while that experienced an impressive multi-year breakout from consolidation a few weeks ago. Thanks to a perfect storm of fundamental and technical phenomena, palladium looks like the trade of the year. As events unfold in key mining countries, South Africa and Russia, as well as the global economy, I’ll keep you updated with technical analysis mixed in for good measure. Although I like to debate the merits of fundamentals, at the end of the day I am a technical trader and base my trading system upon technical analysis.

Stay tuned for my next blog post soon…it covers another market that I’m excited about both from a fundamental and technical perspective that presents another potentially profitable opportunity. 🙂