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Why Risk It?


Why would anyone buy Palladium, futures now at $1365, when Platinum is $870? Sure, Palladium is down from $1600, in backwardation (the spot price is higher than future dates reflecting shortages), and in deficit. Platinum, reflecting surpluses, is instead in contango (spot prices are lower than future prices which effectively, incorporate interest rate charges known as cost of carry).

But guess what, in a simplistic way, both Palladium and Platinum have very similar qualities; they indeed are brother and sister and substitution will occur in the auto catalyst market where Palladium is currently in high demand. 

Yes, it is true, that I am bullish on the entire Platinum Group Metal (PGM) complex, for the many reasons I discuss in my eBook. But personally, I am long Platinum futures, not Palladium. My broader play in the PGMs as I discuss in detail, is using Sibanye-Stillwater, the South African mining company that owns the Stillwater complex in Montana (which is primarily a Palladium mine), as well as PGM mines in South Africa.

Anyway, as much as investing is about making money, it is also very much about not losing money, and the risk profile of Platinum, to me, is far more favorable than Palladium. Again, given the price level, and simplistically, Platinum can go down far less!


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