An Alternative Precious Metals Play

Gold has dominated the precious metals headlines this year.

You’ve watched the yellow metal’s shaky start to 2013. You’ve seen it fall from close to $1,800 back in September to below $1,600 today.

Heck, a lot of this drama has played out on these pages — especially when I gave you advance notice of gold’s impending drop just before it shed $100 on its slide to the $1,550’s.

But gold has settled after a couple of wild weeks. So for now, I want you to focus on another precious metal — one that has not received nearly enough attention lately.

I’m talking about palladium…

Palladium Price vs. Gold Price

“Demand for palladium has been stagnant for over a year, but now is growing,” writes resource maven Byron King. “There’s not enough new palladium mine output (plus recycled metal) to meet the need.”

The need Byron references here is catalytic converters. As automakers ramp up demand, palladium is a key material used in diesel engine catalytic converters. Add in the fact that diesel-powered vehicles are the fastest growing auto segment, and you have a very compelling argument for this industrious precious metal.

It’s no surprise that palladium has broken free from gold over the past two months. After trading hand-in-hand for much of 2012, palladium has picked up the tempo — while gold has stumbled. The palladium to gold ratio has ticked steadily higher for more than four months as palladium prices jumped from a low near $600 in late 2012 to $735 today.

While you wait for gold to tip its hand, betting on palladium is a strong option. Fundamentals and price are lining up in favor of a strong upside move…

Greg Guenthner
for The Daily Reckoning