Palladium Futures Index
- A soft, ductile, steel-white, tarnish-resistant, metallic element occurring naturally with platinum, especially in gold, nickel, and copper ores. Because it can absorb large amounts of hydrogen, it is used as a purification filter for hydrogen and a catalyst in hydrogenation. It is alloyed for use in electric contacts, jewelry, nonmagnetic watch parts, and surgical instruments. Atomic number 46; atomic weight 106.4; melting point 1,552?C; boiling point 3,140?C; specific gravity 12.02 (20?C); valence 2, 3, 4.
Vickers hardness No (annealed condition)
9.93 microhm.cm at 0° C
Origin and history
The origin and history of palladium are closely linked to those of platinum and the rest of the PGMs. Although PGMs are regarded as a "new" metals in their present form, they have a long history. Ancient Egyptians and Pre-Columbian Indian civilizations already valued PGMs alloys as very important elements. The "modern" discovery of these metals is attributed to Spanish conquerors in the 17th century. Actually the name platinum was given by the Spanish word, platina, meaning little silver. Spaniards had discovered alluvial deposits of the rare white metal when they were mining gold in the Choco region in Colombia. Paradoxically, they considered it as a nuisance for mining gold.
W. H. Wollaston, a British chemist, discovered palladium in 1803. It was named after the asteroid "Pallas" which was discovered at about the same time and from the Greek name "Pallas", goddess of wisdom. The techniques used by Wollaston in the separation of PGMs are considered to be the basis for modern PGMs metallurgy.
The production of PGMs requires very complex processing techniques that were not available until the end of the 19th century. Moreover, the high melting points of PGMs were an additional obstacle to work with them. It was only with the development of new refining techniques that these metals were more widely used for new industrial applications.
The importance of palladium, based on its catalytic properties, increased considerably since the 1970s when demand for autocatalysts grew, thanks to the introduction of automotive emission standards in the developed countries. However, during the nineties, use of palladium in autocatalyst soared, since it replaced more expensive and less efficient platinum and emission standards tightened all over the world. Due to the remarkable increase in palladium prices in the late nineties and 2000, preference for palladium in autocatalysts is being reversed.
One of the most important obstacles for a more widespread use of palladium in its history has been its limited supply. At present time, production of palladium is concentrated in a few areas in the world, mainly in the Russian Federation and South Africa. This concentration of production fills the market with uncertainties concerning prices and availability of supply.
Palladium is a very rare precious metal. In nature it is generally found as part of the so-called Platinum Group Metals (PGMs) and together with other metals such as gold, nickel or copper. The PGMs are Platinum (Pt), Palladium (Pd), Rhodium (Rh), Ruthenium (Ru), Iridium (Ir) and Osmium (Os). They are classified under one heading due to their similar chemical and physical properties and because they are often found together. PGM are called also the noble metals as a result of their superior ability to withstand oxidation and corrosion. Platinum and palladium are the major metals of the Platinum Group. Although palladium is mined with platinum and is similar to it in many aspects, there are important differences between the two metals.
Palladium is a scarce and costly metal and, as the other PGMs, it shows unusual properties. The specific chemical and physical properties of this metal are of essential use for a number of different industrial applications. Like platinum, palladium is widely used in "green" applications, particularly in catalysts for the automobile industry. However, its market is very tiny and prices are extremely volatile.
Palladium is the least dense and lowest melting of the Platinum Group Metals. It is a silver-white metal and does not tarnish in air. When annealed, it is soft and ductile. Cold working greatly increases its strength and hardness. It resists high temperature corrosion and oxidation but it is attacked by nitric and sulfuric acid. Palladium has been named the "amazing soaking sponge" because at room temperature it has the unusual property of absorbing up to 900 times its own volume of hydrogen. Hydrogen readily diffuses through heated palladium and this provides a means of purifying the gas. Finely divided it is a good catalyst and is used for hydrogenation and dehydrogenation reactions.
Palladium, Platinum, Gold and Electricity
by Sol Palha, Tactical Investor | February 25, 2008
If you see the bandwagon… you've missed it. James Phillips
The price differential between Palladium and Platinum has now reached historic proportions; if one goes back all the way to 1977 the price differential between the two metals was never more than 550. Today the price differential is over 1300 dollars; Palladium is trading at roughly 420 and Platinum is trading at roughly 1800 dollars. It is more than double that of the prior price differential which stood roughly at 550 dollars. Just this one fact alone is enough to suggest that Palladium is going to go ballistic. Before we carry on remember this good deals do not present themselves everyday and they take time to become good for if everyone realised they were good no one would be able to make a killing. Good deals depend on mass stupidity and mass impatience; this was clearly seen in the dot.com bust, the housing mania, the Gold, silver bull (both took a long time to manifest themselves), base metals, the silent palladium bull, the agricultural commodities and so forth. We got our subscribers into Silver, gold and Palladium bullion early and initially it looked like we might have done the wrong thing for prices pulled back and then did nothing for almost a year. Fast forward now and look how well patience was rewarded. First entry for Palladium bullion was in the 180 ranges and the second was in the 330 ranges.
The second massive anomaly is the fact that Gold is selling for more than Palladium when in fact Palladium is the rarer and thus essentially more valuable of the two metals. Now we have what amounts to a double intra market positive divergence signal; these signals are very rare and so we hardly speak of them. Basically when you get such a signal it indicates that one of the markets is oversold relative to the other to such a point that in most cases it's a result of massive manipulation. This manipulation always comes to an end and when it does the resulting move is huge to say the least. We also have several massive positive divergence signals and so when one adds all these factors its all but a given that Palladium must and will have its day in the sun.
With the advent of the 2500 dollar car from India and a whole plethora of sub 3000 cars which are on the drawing boards of almost all major car manufacturers, palladium is going to be the top metal of choice to use in Catalytic converters. If you have to cut costs down to the last penny are you going to pay 1800 dollars an ounce for platinum or 420 an ounce for Palladium?
Next one of world's largest Platinum and gold producers are having issues with electricity generation; the country is none other than South Africa. Last Friday according to the Wall Street Journal Anglo Platinum, Impala Platinum holdings and Lonmin PLC had to halt some or all of their production activities due to severe power shortages in the country. Eskom holdings, which generate 95% of South Africa's power, told miners that it couldn't guarantee power supply as a result of an "unprecedented level of imbalance". Expert's state that Platinum production may have peaked in 2006 due to power issues and it could be while before this industry gets to these old levels again. Now we have an additional force pushing Palladium up; potential Platinum bottle necks due to lack of electricity. This is how the element of fear starts to get traction. Electricity generation is not something that can be solved overnight. On a separate note this once again illustrates the power full bull in uranium that is just waiting to resume its upward trend. Nation after nation is going to desperately jump on the nuclear band wagon and they will do so as always right towards the end. Uranium is another long term investment that needs both patience and discipline; prices will soar just as fast as they corrected and they will soar to heights that will one day be looked as unbelievable.
South Africa is not the only country experiencing power issues; China is notorious on this front. Industries are constantly fighting for power and have to deal with rolling black outs; in some areas production is timed to certain hours of the day because that's all they have to work with. Chalco the world's second Largest Aluminium maker (based in China) stated that two of its smelters in South Western China had to be closed this week as a result of power shortages. The copper industry in Zambia is only experiencing power problems and the situation is only going to get worse. All these nations rich in commodities raced to increase production of their natural resources but none of them paid attention to the fact that all this increased activity is based on electricity. There is a very serious possibility that many nations will be prevented from increasing production due to power issues and this will have a further upward driving force on commodities.
Palladium stands out like a sore thumb because unlike the rest it has not been in a rampant bull market and now the reasons for a massive spike have just doubled.
If you look at these two charts you can see clearly see that until now the price differential was never more than 550 dollars.
One can see the fortress of resistance the 360-420 zones have presented to Palladium in the last few years. The final layer to break past now is 420, as the 360 price point has been taken out nicely. We believe the momentum will pick up when 420 is taken out for 27-30 days in a row. It's possible that Palladium could trade all the way to 540 before experiencing a meaningful correction.
Platinum has been going through step channel formation and so far this formation has held for 9 years (ignore the price swing to 2400; Prophets Data appears to be wrong and it will be adjusted later on). Platinum looks like it could trade all the way to 2100-2400 mark before pulling back hard.
Palladium surged past 420 with ease on Monday and even though it dipped below 420 on an intraday basis on Tuesday it still managed to close above this level. As stated above it needs to trade above this zone for between 27-30 days; the longer the better. With rolling blackouts now hitting South Africa and with demand for Palladium increasing due to the roll out of the sub 3000 dollar cars we have conditions that could user in a very rapid price move.
Additional comments Feb 23, 2007
Since initially writing this article Palladium has indeed skyrocketed. There are many reasons for this but the primary reason now is that speculators have jumped in as they hope that Palladium will follow in Platinum's footsteps. We have been advising our subscribers for quite sometime now that the price discrepancy between the two metals could not last forever; the price differential is now at an extreme point. When you couple this with the electricity problems South Africa is experiencing it provides almost the perfect scenario to usher in higher prices for the foreseeable future. Platinum production, gold production and the production of various other metals will now be capped IN South Africa because there is simply not enough electricity to support new growth. The advent of the 2,500 dollar car by India's TATA motors has already pushed automotive manufacturers to look into Palladium as an alternative to platinum for use in catalytic converters; add in South Africa's energy issues and you have a very combustible situation at hand. For the record Anglo Platinum Limited (based in South Africa) is the worlds largest producer of Platinum; it alone account for roughly 38% of the world's production. As the energy issues in South Africa are going to take years to resolve this lost demand has to be made up elsewhere and ramping up production is not something that can be achieved over night. The only other option is to look for alternatives and in this case Palladium is a perfect alternative to Platinum. Now the ride up is not going to be one straight line; in a few short weeks palladium is up a whopping 45%. We expect Palladium to trade significantly higher; along the way up we expect several serious corrections and thus knowledge of these markets is essential if you plan on profiting from this ride up. In the metals markets there are only two metals right now that make sense to play and one of them is Palladium.
Interestingly enough there is almost no resistance after 450; the fact that palladium took out 450 so easily suggests that it could essentially trade up all the way to 630 before pulling back. How fast it gets there will off course depend on how many people decide to jump in. Speculators are busy jumping into the futures markets and speculators are notorious for pushing markets to extreme points before bailing out. As always never over allocate money to any given market no matter how good that market looks, to do so would be to go against all the common sense rules of money management. There are also several stocks one could jump into though most of them have moved up and the best time to get into them now would be on a pull back. In the end one must always buy when others are dreaming of buying and sell when others are dying to buy.
The Stealth Palladium Bull
The steeper the mountain the harder the climb the better the view from the finishing line...
Palladium was the underdog of the precious metals sector for a long time, because for the most part it hardly received any attention. In the last few months this all changed and with the introduction of the Palladium ETF (PALL), Palladium has finally emerged from the shadows to the spotlight. Now the average Joe has a way to jump in and out of Palladium without having to actually purchase the metal. In reality owing the physical is far better than buying the ETF, but that is a topic for another day. When the Gold ETF was introduced it helped drive the price of gold bullion because it provided an easy means to jump in and out of Gold and so investors piled into it; from nowhere in a few years GLD has grown into a juggernaut. GLD is now the 6th largest holder of gold bullion in the world. In the same manner demand for Palladium is going to rocket upwards with the introduction of the Palladium ETF (PALL). PALL hit the markets on the 8th of January and it has already had an impact on Palladium's price. Note that Palladium is the only precious metal that has actually put in a new 52 week highs in the face of a stronger dollar
While demand dropped a bit in 2009 due to the economic crisis, this drop did not seem to prevent this metal from surging to a series of new 52 week highs. In fact, in the past 15 months, palladium is the best performing precious metal.
China's appetite for Palladium is growing at a voracious rate. A report by David Jollie published in May 2009 by Johnson Matthey states that demand in Chian surged from 500,000 oz to 650,000 ounces, in 2008. Demand from the Jewellery sector was rather strong in the first three quarters of the year.
In 2008 there was a surplus of 460,000 ounces but net demand still climbed by 15,000 oz, to 6.85 million oz, although the world as a whole was going through one of the worst economic crises in the last 60 years.
The palladium market was in surplus by 460,000 oz in 2008 and yet net palladium demand climbed by 15,000 oz, to 6.85-million ounces, despite the economic slowdown.
Production, on the other hand continues to fall mainly owing to lower production by the two major players in this sector, Russian and South Africa. Production fell to 7.31 million ounces in 2008, a fall of almost 15%. Investment demand for Palladium climbed to 400,000 ounces in 2008, a rise of over 50%. ETF's were the major players purchasing 370,000 ounces and demand via coins and small bars jumped to 30,000 ounces.
As of Feb 2010, the Palladium ETF PALL has 430,000 ounces of Palladium. This is a huge amount of Palladium; to put this in perspective consider the fact that it took the London ETF over 2 years to accumulate the same amount.
As stated below the demand for precious metals (Palladium, Platinum, Gold and Silver) is increasing at a voracious pace and the story below quite clearly illustrates this point.
Investments in precious metals such as gold, silver, platinum and palladium are in feverish pitch across China. No wonder, then, that the Chinese consumption of precious metals is dramatically going up, and up. China consumed 395.6 tonnes of gold in 2008 for jewelry and investment, reports the World Gold Council, or around 14% of global demand, up from 327.8 tonnes in 2007. In 2009, gold jewelry and investment demand in China is expected to reach 432 tonnes, compared with 422 tonnes from India.
On the derivative exchanges, China's Gold Futures trading volume hit 1.49 trillion Yuan in 2008. This is likely to double in 2009. Ditto platinum and palladium. Physical Chinese demand for platinum jewelry was at around 0.76 million ounces last year, accounting for 68% of the global total of 1.12 million ounces. The latest forecast sees that hitting 1.5 million oz in 2009, which even if it is a gross rather than net (of recycling) remains impressive. The Chinese jewelry demand for palladium increased from 15.5 tonnes to 20.2 tonnes, making palladium another hot commodity in China.
China usurped India as the World's largest consumer of Gold this year and will probably end up being the largest consumer of all the remaining 3 precious metals in the years to come.
Now let's take a look at the Technical picture.
Palladium took a massive beating in 2008 and surrendered all its prior gains in a matter of months. However, this proved to be a buying opportunity of a lifetime, and we continuously pounded the table from late to 2008 to early 2009 and even went so far as to inform our subscribers' that it had fallen into the screaming buy category. The term screaming buy is rarely used, and we only use it when we feel that we have spotted an investment that is extremely undervalued with incredible upside potential. From low to high Palladium surged well over 120% in a period of roughly 15 months; an incredible rate of return to say the least.
It broke through the 1st resistance point at 375 with relative ease and is now attempting to break past an even stronger zone of resistance. The $465-$475 ranges make up a zone of very strong resistance, and most likely it will take several attempts before palladium manages to break past this zone; once it does though it should be clear sailing to the 550-600 ranges.
Palladium is now at a very important junction; it has just broken through the long term down trend line and is attempting to break out of a 10 year channel formation. Palladium will now need to trade past the 465-475 ranges for 12 days in a row. If it can achieve this, it will set up the base for a rally that could take it all the way to the 800-890 ranges. If we had to put a time frame on this, we would say that once it trades past the 456-475 ranges for the suggested period of time, it could hit these targets within 12-18 months.
The real bull market, however, will only begin when palladium trades past 1100. Taking an even long term view; a close above 1100 on a monthly basis and the ability to trade past this level for 15 consecutive days in a row, should lead to a test of the 1500-1700 ranges.
On our proprietary timing indicators Palladium has an open Buy signal on the daily, weekly and monthly time lines, so the long term outlook for this metal is rather bright. It is the only precious metal that went on to put in a new 52 week high in the face of a stronger dollar. More importantly it is also the only precious metal that did not issue a weekly sell signal at all during the dollar's surge upwards; it momentarily issued a daily sell which has long since been neutralized.
The long term and the very long term outlook for Palladium is extremely bright. In the short to intermediate terms Palladium is due for some profit taking as it has mounted a tremendous rally in the past 15 months. Prudent investors would be wise to use any strong pull backs to add to or open up new positions in this metal. Investors will one day look back and view the current price as a bargain, do not make the mistake of looking out the window and wishing you had bought it. Now that you have the chance make sure you at least have a small position in it and use pullbacks to add to this position. While purchasing PALL might be one way to take a stake in Palladium, our preferred method of choice is Palladium bullion. Our bullion dealer of choice is Larry Labrode, our subscribers have dealt with him for years and his service and knowledge are simply outstanding to say the least. You can make contact with him at www.silvertrading.net
One who has imagination without learning has wings without feet.
Joseph Joubert, 1754-1824, French Moralist
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