Thursday, June 14, 2007

SWC Has Bottomed And Turned Around!

It now looks like SWC has bottomed in recent correction, and is turning back up. From here on it should take about 1.5 months to get back to $16 and beyond. I am glad that I sold some SLV to load SWC two days ago at $11.40. Not glad that I only sold a small portion of SLV to load SWC. Had I been a gambler I would have sold everything and buy SWC.

There is no question in my mind that SWC should be doing very very good. Palladium is too important a metal to be priced so low. Something as rare as platinum, as useful as platinum and even more, and 10 times more rare and 10 times more useful than gold, is now priced below gold price? That doesn't sound right. After adjusting for inflation, current palladium price is historical low, not historical high. Look at the many important applications of palladium. Besides industry application of palladium in traditional and new technologies, I believe the three most important bullish driving forces of palladium are:

1.Auto catalyst. The auto industry switched from palladium to platinum some time ago because palladium was more expensive. Then why wouldn't they switch it back. It's about time.

2.Jewelries. People need a white and pure precious metal for certain jewelries. Pd 950 is whiter than platinum. It is a pure metal, not an alloy, it is wear resistant, will not tarnish like silver does. The weight is light. The price is affordable. Especially the weight being light is very important in some jewelry applications, like big ear rings and engagement rings.

3.Investment demand. Some investors are determined, based on their judgement of the palladium fundamentals, that palladium price will see dramatic increase. So there are increased investment demand. Such demand further pushes the metal price higher, attracting more investment demand. This trend will feed itself and could really corner the palladium market, which is very narrow in terms of US dollars. Just look at the bottom of the chart, see how open interest and trade volume all see dramatic boost after summer of 2003.

(Click on the chart to enlarge. Click here to see the original chart)

Inquiry mind wants to know how many different palladium coins have been minted. Here is a link to the statistics. Interesting, one set of 4 palladium four season constellation coins minted by the Canadian Royal Mint, now costs US$6600 on eBay . There were only 300 sets minted! Wish I could have bought one set cheaper.