A year ago, I wrote a piece titled "The Case for Palladium". At that time I made a case that palladium prices, at 194, were extremely undervalued. Since that time, we have seen the price of Palladium move to over $400/ounce, before dropping $90 from its high. Currently, Palladium is trading at $312/ounce. At this point, I believe Palladium prices are again extremely undervalued.
If you did not read my article, I urge you to read my above mentioned article. The fundamental reasons behind owning palladium still remain the same. If anything, the past year has only reaffirmed those reasons.
Pollution and Palladium
One of my clients recently returned from China, after living in the United States for the past 15 years. I spent a good amount of time talking to her about her experience and thoughts about the transformation that has taken place over the past decade and a half. Although she is not an economist, I often find that your average person has the best and unbiased insights. The first point she made was that the pollution was unbearable.
Of course, this makes sense. In the past decade and a half, China has focused on economic growth, industrialization, and the subsequent expansion of cities. With the expansion of cities and industrialization, you can expect subsequent pollution. In fact, the pollution is so drastic that the World Bank has reported that China has 16 of the top 20 most polluted cities in the world.
Because of this increased pollution, China has embarked on a crusade to clean up emissions. In recent months, a new environmental initiative was passed that would require the reporting of energy consumptions and emissions every six months. One of their main goals is to reduce energy pollutants by 10 % in the next 5 years.
So what does this mean for Palladium? Well, as I mentioned in my previous article, Palladium is mainly used in autocatalytic converters. It is also still substantially cheaper than its platinum counterpart.
Over the last several years, one of the major causes of pollution in China has been the increase of cars on the roads. The China Association of Automobile Manufacturers reported that there were 50% more cars sold in the first half of this year than there were last year. One can only imagine that with the continued growth of the Chinese consumer, the demand for cars will only rise. Subsequently, the demand for a cheap industrial metal alternative will likely also rise.
Short Term Technical Video
Many of you have requested further videos from John Carter of www.tradethemarkets.com.
Below you will a video link of his updated short-term outlooks on Gold, Silver, Oil, Platinum and Palladium.