“What’s your take on the price of palladium,” asks Cheap Investor reader Scott. “Should I buy related stocks?”
To be completely honest, buy only if you like losing money.
The bulls have gotten ahead of themselves again. The metal may be under very heavy demand with little supply. But it’s only appreciating this fast because of the South African strike.
Once that strike ends, the metal will come down.
"There is no reason to sell palladium right now," says Frank Lesh, a broker at Future Path Trading, as quoted by Zero Hedge. "This thing can go to $1,000."
“With the metal hitting new highs this week, we expect more outperformance,” say other newsletters. “The move is just getting started. It’s still catching support.”
They’re forgetting one simple thing here. Strikes do end…
In August 2012, the price of palladium spiked because of labor unrest in South Africa. It would crumble to about $575 shortly after.
In October 2010, rocketing palladium priced above $850 on reports that palladium was in dire shortage. Investors called for $1,000. Shortly after, the metal would fall from those highs to a 2011 low of less than $550.
On January 26, 2001, palladium was above $1,090. It would plummet shortly after.
In recent days, we saw challenging highs. But an interesting thing happened. Palladium fell as “mining companies and union officials agreed on a wage pact to present to workers in a bid to end a 20-week strike,” according to Bloomberg.
As soon as the strike is over, some supply concerns will end… and we will see a more meaningful pullback in spot prices. We would not chase the greed. It’s not worth it.
As reported by The Wall Street Journal, “Demand from the auto industry, though improving, may not be strong enough to keep prices high without supply concerns also lending support, analysts say.”