Normally, I wouldn't be a palladium buyer. Mainly, this is due to my not being an auto manufacturer. However, with the recent run up in price, palladium has pushed itself to the front of the conversation for those looking to invest in precious metals. So, here is why I wouldn't buy palladium right now, and I'd give great consideration to selling Mar 15 or later delivery date contracts. 1) Political turmoil is the primary driver in price. Although manufacturers have also been consuming palladium for cars, the reality is that the price is being driven almost entirely by Russian producers not producing, or, at the least, lowering output. 2) Platinum ratio. Palladium is considered a cheaper, somewhat less efficient / more toxic, substitute for its PMG sibling platinum. With the platinum ratio now under two, platinum has a screaming buy signal, relative to palladium. 3) Producer response. With palladium prices through the roof, producers should be considering selling into the demand and opening new ventures. The lack of activity and investment in this area implies an expectation of lower prices in the medium and long term. Those three reasons are the primary drivers behind my decision to avoid any sort of palladium investment. We could see a quick collapse (30%+ in the metal by the end of next Spring.
I suppose that somewhat reinforces my position, so thank you for pointing it out: #4) King World News is bullish on palladium.
I too believe Pd is grossly overvalued, especially relative to Pt. Liked the bit about 'not being an automotive manufacturer'. Haha.
The above is actually wrong for most people who would be trading in precious metals. It's actually significantly closer to 85/15. It's also wrong for those who speculate in precious metals based upon what so-called gold bugs tells them. That's closer to 15/85. As I said in the original post, I'm not anti-PMs, even in a rising rate environment, they have their place. However, Palladium has no place in a portfolio that isn't purely trying to time Russian store releases. History has a tendency to repeat itself, and Russia already proved in Dec 2000 - Feb 2001, that the country will manipulate supply during short-run demand spikes. (Edit note: Made date more specific than "2001.")
