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Trade Recommendation: Palladium is Soaring – Best Performing Precious Metal in 2017

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Several sources are now reporting an increasing supply deficit for palladium in 2017. According to a report by the Financial Times, “the palladium market is witnessing a rising deficit”. This would mark the sixth successive year of significant supply shortages in the palladium market, whereas its sibling platinum this year may be experiencing its first supply surplus in six years.

Best-performing precious metal year-to-date

In addition to this, as we have previously reported here on Hacked.com, palladium has outperformed both gold, silver, and platinum by more than 300% since 2009, and outperformed all other commodities in the Bloomberg Commodity Index so far in 2017.

The chart below shows the price of palladium in US Dollars over the last 12-month period. As you can see, this is a healthy trending market, trading above both the 50 and 100 day moving averages. It is exactly the type of market any trend following trader should be invested in.

Strong fundamental support

Palladium is an industrial metal primarily used as an important component in catalytic converters that reduce the amount of harmful air pollutants from cars. As we have spoken about before, some analysts believe that this will continue to drive the price of palladium higher, as China and other large developing countries are stepping up the fight against air pollution.

Platinum, on the other hand, is used in diesel-fueled cars, which are now experiencing a downturn mainly due to environmental concerns. As the trend of gasoline fuel being favored over diesel continues, the price of palladium is expected to continue to rise at the expense of platinum, and may soon surpass it, despite being known as a “lesser” metal.

Limited and vulnerable supply

Being far rarer than both gold and silver, palladium (and platinum, for that matter) is almost exclusively mined in only two countries; Russia and South Africa. In the case of South Africa, output of this precious metal is under pressure from political instability, labor strikes, high operating costs for miners, and infrastructure problems. The Russian production is relatively stable, but there are almost no new palladium mining operations being started, even as demand for the metal is continuing to grow.

How do I play the surge in palladium?

Probably the best way to play the palladium market is through the ETFS Physical Palladium Shares with the ticker code PALL. This ETF is backed by physical palladium bullion bars stored in its vaults in London and Zurich. ETF’s are in many cases a cheaper option for long-term investments in precious metals, when compared with physical ownership, and they can be traded through most online brokers.

FOREX trading

Many brokers also let you trade palladium on margin in the forex market under the name XPDUSD, as shown in the screenshot below from my Saxo Bank brokerage account.

This is the option I recommend for shorter-term trading, because of the relatively low transaction cost compared with the benefits of the leverage you get. Keep in mind, however, that spreads can be wide for metals like palladium, as there is far less trading activity in them than for example in the gold and silver markets.

Physical ownership

Although physical ownership is sometimes more expensive than simply investing in an ETF, it comes with a good sense of security, has an inherent value for collectors, and is not subject to any third party risks. You can touch and feel your own precious metal without involving the taxman or the bank at any step of the way. It is perhaps the ultimate solution for the small investor who just feels good about keeping a portion of his wealth in a tangible asset.

You may also choose to buy physical bars or coins and have it stored in a vault for you. Great places both for buying and storing precious metals is Hong Kong and Singapore, where you can trade physical precious metals at some of the lowest buy/sell spreads in the world, as well as storing it for a very low cost.

What’s next for palladium

Despite having risen almost 50% over the last 12 months, palladium may well continue to climb further. There is no new supply coming to the market, and demand for gasoline-fueled cars (at the expense of diesel-fueled cars) continues to grow from emerging markets.

When people look to invest in precious metals, gold is usually what comes to mind. However, with the increasing industrial demand for the other precious metals, in addition to investment demand, it is clear that there may be more potential for profit with some of gold’s less shiny siblings. In this respect, palladium is well-positioned to surpass platinum and become the most sought-after precious metal after gold and silver.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.3 stars on average, based on 37 rated postsFredrik Vold is an entrepreneur, financial writer, and technical analysis enthusiast. He has been working and traveling in Asia for several years, and is currently based out of Beijing, China. He closely follows stocks, forex and cryptocurrencies, and is always looking for the next great alternative investment opportunity.




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Commodities

Oil Rally Slows amid Reports of OPEC Infighting

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Crude oil is under pressure Thursday as reports of OPEC infighting cast doubts about the cartel’s ability to rein in production in 2019. Saudi Arabia, the group’s de facto leader, is also under attack following an IEA reporting showing record output from the kingdom in November.

Rally Sputters

The rally in crude prices appears to be choppy and short-lived since last week’s high-profile production meeting in Vienna, Austria. On Thursday, U.S. West Texas Intermediate (WTI) futures were down 34 cents or 0.7%, to trade at $50.81 a barrel on the New York Mercantile Exchange. The January futures contract reached a session low of $50.35 a barrel.

Brent crude, the international futures benchmark, bottomed at $59.33 a barrel on London’s ICE futures exchange. At the time of writing, it was down 35 cents, or 0.6%, to $59.80 a barrel.

Record Production

The International Energy Agency (IEA) reported Thursday that crude production among OPEC members reached record highs in November, casting doubts about the planned output cuts by Saudi Arabia and its allies. The 15-member cartel churned out 33.03 million barrels per day in November, a net gain of 100,000 barrels per day over the previous month.

Gains were driven entirely by two members: Saudi Arabia and the United Arab Emirates. Saudi’s daily production jumped 410,000 barrels to 11.06 million barrels, a new record high. The UAE saw its output climb by 110,000 barrels per day to reach 3.33 million barrels per day. In doing so, the UAE surpassed Iran as the group’s third-largest producer.

IEA data contrasts sharply with the official OPEC report, which showed a slight decrease for the month of November. More importantly, it raised suspicion that the Saudis are not intent on lowering production by any significant amount in the new year but are simply paring back from record levels.

Political Headwinds

The Saudis are facing pressure from within the producer group and from the United States on issues ranging from production policy, the war on Yemen and the killing of Jamal Khashoggi. Bloomberg reports that Iran’s oil minister Bijan Zanganeh has vocalized serious political disagreements within the cartel that came to light during last week’s production meeting in Vienna. What’s more, Qatar is planning to quit the producer group in the new year to focus on natural gas production. This may exacerbate the geopolitical rift between Doha and a Saudi-led coalition of Arab states that have blockaded the tiny Gulf country.

In a rare show of bipartisan support, the U.S. Senate last month voted to end support for Saudi Arabia’s devastating war on Yemen. The vote came as the CIA offered irrefutable evidence that Saudi Crown Prince Mohammed bin Salman (MbS) was party to the killing and dismemberment of U.S.-based journalist Jamal Khashoggi.

You have to be willfully blind not to come to the conclusion that this was orchestrated and organized by people under the command of MbS,” Republican Senator Lindsey Graham said earlier this month.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.6 stars on average, based on 697 rated postsSam Bourgi is Chief Editor to Hacked.com, where he leads content development for one of the world's foremost cryptocurrency resources. Over the past eight years Sam has authored more than 10,000 articles and over 40 whitepapers in the fields of labor market economics, emerging technologies, cryptocurrency and traditional finance. Sam's work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Contact: sam@hacked.com Twitter: @hsbourgi




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Commodities

Oil Prices Rise Anew Ahead of Saudi-Led Supply Cuts

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Crude oil bounced back sharply on Tuesday after Saudi Arabia provided hard numbers on its planned output cuts in January, raising optimism that OPEC and its allies were pushing ahead with their plan to drain the market of excess supply.

Crude Bounces Back

The West Texas Intermediate (WTI) benchmark for U.S. crude futures climbed $1.24, or 2.4%, to $52.24 a barrel on the New York Mercantile Exchange. The London-traded Brent contract for February settlement gained 90 cents, or 1.5%, to $60.87 a barrel. Both contracts are down more than 30% from their October peak.

The two-month selloff followed a half-year stretch of considerable gain for oil, with several analysts forecasting a return to $100 a barrel in the not-too-distant future. A combination of global growth woes, efficient U.S. shale production and rising inventories has delivered a major blow to that outlook.

Saudi Announces Production Cuts

Oil prices have bounced around since late last week, as traders continued to evaluate market fundamentals. On Thursday, the Organization of the Petroleum Exporting Countries (OPEC) announced it had agreed to reduce crude output in the new year. Twenty-four hours later, the cartel and its principal ally, Russia, agreed to curb production by 1.2 million barrels per day.

The Saudis have backed up that commitment by announcing Tuesday that crude supplies will fall to 10.2 million barrels per day in January compared with 11.1 million in November. At the same time, Libyan production fields remain offline after armed protesters forced a shutdown of the Sharara oil field. That will cost the war-torn nation in excess of 300,000 barrels per day, according to the state-owned National Oil Corp.

The production shortfall in Libya, combined with the export restrictions placed on Iran, should help OPEC and its allies drain the excess supply glut. However, the cartel is unlikely to succeed in the long run as higher prices encourage U.S. producers to ramp up production. In a recent forecast, analysts at Citi said they expect international crude prices to remain stuck at $60 a barrel for the balance of 2019. That’s not far off current levels.

In terms of data, the American Petroleum Institute (API) will report on U.S. inventories later in the day. The official crude inventory report courtesy of the U.S. Energy Information Administration (EIA) will be released Wednesday morning.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.6 stars on average, based on 697 rated postsSam Bourgi is Chief Editor to Hacked.com, where he leads content development for one of the world's foremost cryptocurrency resources. Over the past eight years Sam has authored more than 10,000 articles and over 40 whitepapers in the fields of labor market economics, emerging technologies, cryptocurrency and traditional finance. Sam's work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Contact: sam@hacked.com Twitter: @hsbourgi




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Commodities

Oil Prices Dip Following OPEC-Russia Boost

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Crude oil was back on the defensive Monday, as the OPEC-induced rally showed signs of fizzling amid apparent geopolitical and economic headwinds. In short: traders are still doubting whether the planned output cut announced on Friday will be enough to drain the supply glut in the face of waning economic growth and lower demand projections.

Rally Falls Short

The U.S. and international benchmarks declined at the beginning of the week, partially offsetting Friday’s short rally. The U.S. West Texas Intermediate (WTI) benchmark swung from an intraday high of $52.81 a barrel all the way back down below $52. At the time of writing, WTI for January settlement was worth $51.91 a barrel, down 70 cents, or 1.3%. Brent crude for February delivery slipped 55 cents, or 0.9%, to $61.12 a barrel.

Natural gas prices were also down on Monday. The benchmark Nymex futures contract dipped 3 cents, or 0.6%, to $4.46 MMBtu.

A stronger U.S. dollar was a primary source of headwinds for commodity prices on Monday. The dollar index (DXY), which values the greenback against a basket of six currencies, rose 0.3% to 96.76.

OPEC+ Deal

On Friday, the Organization of the Petroleum Exporting Countries (OPEC) announced it had reached a deal with Russia to reduce global crude output by a combined 1.2 million barrels per day. The output cut was higher than expected and signaled a renewed readiness to re-balance the market following a two-month collapse in prices. Crude officially entered bear-market territory last month, having lost roughly one-third of its value since the October high.

According to analysts, the decision by OPEC, Russia and their allies should stem the price collapse for the time being and support a recovery towards $70 a barrel. However, it’s not entirely clear whether the strategy is sustainable given the resurgence of U.S. shale and America’s push for energy independence under President Trump.

The U.S. leader has blasted OPEC for its production policies and has called on the cartel not to support any initiative that would raise prices drastically. The Trump administration is relying on competitive crude prices to feed the nation’s economic recovery, which is showing signs of slowing.

At the same time, there are considerable doubts about how the OPEC+ coalition will implement its production cuts. Analysts at Goldman Sachs Group Inc. and Morgan Stanley have expressed concern about whether producers can stay on the same page given how difficult compliance has been in the past.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.6 stars on average, based on 697 rated postsSam Bourgi is Chief Editor to Hacked.com, where he leads content development for one of the world's foremost cryptocurrency resources. Over the past eight years Sam has authored more than 10,000 articles and over 40 whitepapers in the fields of labor market economics, emerging technologies, cryptocurrency and traditional finance. Sam's work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Contact: sam@hacked.com Twitter: @hsbourgi




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