Why I’m Extremely Bullish On Platinum and Palladium [ETFS Physical Palladium Shares, ETFS Physical Platinum Shares]

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January 21, 2014 3:29pm NYSE:PALL NYSE:PPLT

platinum11James DiGeorgia: The Conference Board and many other researchers say the world can expect moderate global economic growth this year — up from 2.8% in 2013 to 3.1% in 2014.


This could mean profit opportunity in two important natural resource markets. Today I’ll tell you what they are and how you can invest in them. First, you need to understand why the growing economy will help.

Most forecasters think mature economies will show the most improvement this year. Much of the uptick will be a result of the euro zone finally coming out of its two-year recession.

The International Monetary Fund is even more positive, expecting the global economy to grow 3.6% in 2014.

The U.S. and China will spur growth for the rest of the global economy. Politics could also play a role, especially in Europe.

Virtually all the U.S. economic numbers improved in recent months. The U.S. economy should grow by at least 2.7% this year, with many economists now predicting 2014 growth rates well over 3.0%.

Even the most problematic sectors are improving. The U.S. unemployment rate for December dipped to the lowest level since 2008. The prospects for lower unemployment in 2014 are excellent. Tim Hopper, chief economist for TIAA-CREF said recently …

“Just about every other measure of job growth suggests that employers are either hiring or intending to hire, extending hours and laying off fewer people.”

The unemployment should decline to at least 6.0%, and the U.S. could reach nearly “full employment” at 5% by 2015.

Source: WSJ

More good news: Another self-imposed government crisis seems unlikely with the recent passage of a bipartisan federal spending bill. I think Congress is unlikely to put our country at risk of a debt default.

Natural resource investors should pay attention to this steadily improving economic environment. Economic growth will sharply increase demand for oil and many natural resources, including industrial metals and agricultural commodities.

One natural resource segment may enjoy both growing demand and a supply shortage — thanks to Russian President Vladimir Putin.

Platinum and palladium are necessary to produce automotive catalytic converters and other anti-pollution technologies. Expensive jewelry often includes platinum along with gold and silver.

The global “platinum deficit” was over 600,000 ounces in 2013 as demand exceeded available supplies. The deficit shows no signs of easing. In fact, 2014 will be the third consecutive annual shortfall between platinum mine production and world demand for the metal.

The global palladium balance is no better, with the 2013 production totals as much as 700,000 ounces short of demand. Demand for both metals continues to increase sharply as the automotive industry rebounds from the 2008-2009 economic crises.

Vladimir Putin’s government in Russia is further aggravating the palladium shortage. Russia has the world’s largest palladium stockpile, but sales dropped steadily in recent years as the government hoarded metal reserves. Russia sold only about 100,000 ounces in 2013.

Russia’s annual palladium sales once amounted to nearly two million ounces, keeping worldwide supply and demand in equilibrium. With Russian sales now clearly in a downtrend, I believe the annual palladium deficit could rise over one million ounces in the next few years.

Automotive manufacturers simply cannot make cars without catalytic converters. That means they must buy large amounts of either platinum or palladium. There are no viable substitute materials yet.

Platinum is already trading over $1,400 an ounce and I believe it will rise to $1,800 or more in 2014.

Palladium is now around $750 an ounce. Given the large shortfall in the supply/demand picture and improving economic climate, my 12-month price target is $900 an ounce.

Looking out four years, I will not be surprised to see platinum hit $3,000 and Palladium rising to $1,800. Two big factors will combine to drive prices higher.

#1: Horrific Pollution in China, India and the Developing World

I know some will argue that China does not care about environmental and health issues. You can bet they do now!

There are days in Shanghai when the smog is so thick residents must wear masks. Last month my colleague Tony Sagami wrote about how the city of Nanjing — where the sky was the color of “salted egg yolk” — closed its schools due to the air pollution.

But that’s about to change.

In the last month, the Chinese government announced plans to outlaw smoking in public places. Both public policy and popular sentiment are swinging in favor of environmental concern in China.

#2: Growing World Automobile Demand

China, India and other emerging economies are regaining their economic footing. Vehicle demand will soar even higher in these places.

How to Invest in Platinum and Palladium …

My personal preference is to physically own precious metals. Platinum and palladium are available in certified one-ounce bars, each sealed with a serial number. You can buy them precious metals and rare coin dealers for $40 to $50 over the spot price.

The slowly-but-surely global economic recovery will drive up both vehicle and jewelry demand for these metals. With physical bullion, you’ll be set to profit as their prices take off.

james-digeorgiaThis article is brought to you courtesy of James DiGeorgia

Uncommon Wisdom Daily is a free daily investment newsletter published by Weiss Research, Inc. This publication does not provide individual, customized investment or trading advice. All information is based upon data whose accuracy is deemed reliable, but not guaranteed. Performance returns cited are derived from our best estimates, but hypothetical as we do not track actual prices of customer purchases and sales. We cannot guarantee the accuracy of third party advertisements or sponsors, and these ads do not necessarily express the viewpoints of Uncommon Wisdom Daily or its editors.


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