Letter Re: Investment Recommendation: Palladium

Dear Jim,
My recommendation for an investment metal is palladium. The first thing we need to look at in relation to this is rhodium.
As can be seen in the Kitco charts, rhodium’s value has gone to insane levels, due to a combination of supply troubles–Russia and South Africa are the primary sources, and neither is tremendously stable–and demand issues. As China and India develop, all the commodities will be more in demand, and India has made great strides in the last few years as is noted from this Indian American blogger. So the industrial metals in limited supply will feel the bite even more than the base metals. Rhodium is used for mirror surfaces, catalytic converters, catalytic chemistry for hydrogen reactions, including all the state of the art research into fuel cells and for some jewelry concepts.
What does an industry do when one of its critical resources increases 15-20 times in cost? They find a substitute.
Is there a metal that can substitute for rhodium in most chemical processes? Yes. Palladium. See the Kitco chart on palladium.

While I don’t see palladium making the jump rhodium has, I do expect that a lot of industries will switch over to it on some lines, just to reduce overhead. This will take a few years, as it will require modification or rebuilding of existing facilities, but once it does, I can easily see palladium at $1000 an ounce, up from the $300 or so it’s at now. The Royal Canadian Mint produces .9999 Pd legal tender coins. They Canadian coin has become so popular that the other producers have stopped for the time being.
Also, since it’s currently half the price of gold, it’s not too tough to buy the five ounce minimum many sellers want to secure a good price.
This isn’t a coin to buy for after-SHTF trading, though many will still recognize it, but it’s a good metal to have against economic issues–in demand, with increasing demand and likely to become scarcer and more popular with political problems related to any worldwide disaster plaguing supplies of rhodium. – Michael Z. Williamson