Palladium Is the Anti-Tesla Bull Market

You would think that if the world is on the brink of going electric, that should mean less need for palladium. But that hasn’t been the case.

The palladium bull market flies in the face of what investors “know” right now.

It began back in January 2016 and has not let up. After 22 months, it just hit a major milestone. The price is up 109% from its low and shows no signs of slowing.

You see, palladium’s demand comes from automobiles. The gas-powered kind.

Cars need nearly 80% of the world’s supply for pollution controls. Catalytic converters clean exhaust and reduce smog. That’s where all this metal goes.

The thing is, everyone hates oil today. The price is low. Electric cars are taking over. You would think that if the world is on the brink of going electric, that should mean less need for palladium.

But that hasn’t been the case.

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Palladium’s Massive Rally

Palladium is the anti-Tesla bull market. It shows us that someone still wants cars that run on gasoline, as you can see from the chart below.

You would think that if the world is on the brink of going electric, that should mean less need for palladium. But that hasn’t been the case.

The demand for palladium drove the price up to a point that it hasn’t seen since 2001. That is, the price of an ounce of palladium now costs more than an ounce of platinum.

As you can see in the chart below, this situation needed a rally of palladium while the price of platinum fell:

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This is an opportunity for investors. There are two major takeaways from palladium’s massive rally.

From 2000 to 2001, palladium was more expensive than platinum. During that period, the price of palladium exploded. It peaked at $1,110 per ounce.

Platinum prices followed the price higher, but never got close to that high. Platinum peaked at around $620 per ounce.

That means we should put on a palladium trade. If history repeats itself, we could make double digits on a palladium top.

There are a couple ways to do that.

Capturing the Palladium Run

The ETFS Physical Palladium Shares (NYSE: PALL) holds physical palladium. Its goal is to reflect the price of palladium. That makes it perfect for a pure palladium speculation.

Another way to capture both the palladium run along with the expected rise in platinum prices is the Sprott Physical Platinum and Palladium Trust (NYSE: SPPP). Like PALL, SPPP holds physical platinum and palladium.

SPPP holds 37,658 ounces of platinum and 84,854 ounces of palladium. That means its assets are 70% palladium to 30% platinum. We can benefit from the strong climb in the palladium price, while being open to a future bull market in platinum.

Either of those funds will work for a palladium speculation.

However, the bull market in palladium also tells me that oil demand is still growing. More cars equal more oil … but that’s an idea for a different essay.

Good investing,

Matt Badiali
Editor, Real Wealth Strategist

  • SilenceIsConsent

    Oil and gas are cheap? The oil and gas industries have no boundaries to the pollution emitted, contamination of the ocean and ocean life, pipeline and massive spills or initiating preventative measures to assure all life is respected and fully protected. Cheap? No. The oil and gas industries are no different than terrorists with a stranglehold on transportation trading the promise of jobs for massive destruction our only home and all life forms.
    Every pipeline spill in the U.S. since 1986. The map doesn’t include methane gas leaks, oil leaks or fracking waste water leaks into aquifers. https://uploads.disquscdn.com/images/1b6c0e1915c17edba09ecb964a164d4c927699ca378619a384977798cdeaa90e.jpg https://www.treehugger.com/fossil-fuels/video-shows-every-oil-pipeline-spill-us-1986.html

  • Wilhelm

    You’ve got a good point, but the one made by the article is that we don’t pay much for fuel. If the true costs, for road construction, etc, were reflected by properly taxing motor fuel instead of subsidizing with income tax, there would be a massive demand for fuel efficient cars, rail transport, etc.