Best of the Week
Most Popular
1.Gold Price Target of USD 2,300 - GoldCore
2.Greece Banking System Collapse Monday as ECB Pulls the Plug, Capital Controls Ahead of GrExit - Nadeem_Walayat
3.Why British Muslims Are Leaving Elysium Paradise for Syrian Hell - Nadeem_Walayat
4.Greece BANKRUPT! Financial and Economic Collapse to Follow IMF Debt Default - Nadeem_Walayat
5.Extreme Gold/Silver Shorting - Zeal_LLC
6.European Empire Strikes Back Against Greek Debt Fantasy, Counting Down to GREXIT - Nadeem_Walayat
7.Gold And Silver – Three Choices: Sell, Hold, Hold and Add. A Trading Treatise - Michael_Noonan
8.Gold and Silver Price Headed for Breakdown - Jordan_Roy_Byrne
9.Greece Crisis OXI - Raul_I_Meijer
10.Flatline Investing and Dead End Debt Schemes - Doug_Wakefield
Last 5 days
Forget Drachmas Greece Syriza Government Could Instruct Central Bank to Print Euros! - 2nd July 15
Greece Debt Crisis Trigger for Stock Market Crash or Bull Rally? Video - 1st July 15
Gold Stocks Break Below 2008 Low - 1st July 15
SPX Stock Market Retracement May be Over - 1st July 15
Silver Tunnel Vision 'Experts' - 1st July 15
Gold And Silver - Monthly, Quarterly Ending Analysis - 1st July 15
Europe’s Controlled Demolition - 1st July 15
The End of Dow 18,000; Bailouts No Longer Extended  - 1st July 15
Athens Mayor: Greek Government Should Resign - 1st July 15
China Stocks - This Is What a Bubble Looks Like - 30th June 15
Stocks Plunge on Greece Euro-Zone Financial Armageddon Blackmail - 30th June 15
Greece Crisis Shows Importance of Gold as Europeans Buy Coins and Bars - 30th June 15
Stock Investors Express Route to Profits in the Healthcare Sector - 30th June 15
Beyond the Greek Impasse - 30th June 15
Gold GDXJ : Impulse Move Pending - 30th June 15
Fed Interest Rate Increase Could Be Best Thing to Happen to Gold - 30th June 15
Marc Faber - Greece is Basically Bankrupt - 30th June 15
Greece - Shoot the Dog and Sell the Farm - 29th June 15
Grexit?, BIS Warning, Chinese Market Crash & Systemic Risk Shake the Global Economy - 29th June 15
The New "Sharing Economy" May Not Be the Profit Bonanza Everyone's Expecting - 29th June 15
Gold and Silver Greece and Short Positions - 29th June 15
Volatility and Sleep-Walking Markets - 29th June 15
Greece BANKRUPT! Financial and Economic Collapse to Follow IMF Debt Default - 29th June 15
Stock Market More Decline Ahead? - 29th June 15
China Stock Market Crackup - The Final Trap Looms... - 29th June 15
Greece Banking System Collapse Monday as ECB Pulls the Plug, Capital Controls Ahead of GrExit - 28th June 15
Investor Stock Play for Two Growing Missile Threats - 28th June 15
Stock Market Uptrend/downtrend Inflection Point - 27th June 15
Greece Crisis OXI - 27th June 15
Gold And Silver – Three Choices: Sell, Hold, Hold and Add. A Trading Treatise - 27th June 15
It’s Time to Change the Way You Look at Disney Forever - 27th June 15
Flatline Investing and Dead End Debt Schemes - 27th June 15
Stock Market Investors Avoid the "Herd" Like the Plague - 26th June 15
Extreme Gold/Silver Shorting - 26th June 15
USD Daily, Weekly, Monthly & Conclusions - 26th June 15
Gold Price Target of USD 2,300 - 26th June 15
Gold and Silver - Another Successful Option Expiration For the Insiders - 26th June 15
Why Buffett Bet A Billion On Solar Energy - 26th June 15

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

China Stocks - Where are they going?

What Are the Two Hottest Precious Metals? Hint: Gold Isn’t One of Them

Commodities / Gold and Silver 2013 Feb 08, 2013 - 10:26 AM GMT

By: InvestmentContrarian

Commodities

Sasha Cekerevac writes: Many investors in gold mining stocks have been disappointed over the past few months, as their shares have languished. Since November’s low, gold has gone down slightly, currently trading at $1,665 an ounce. Obviously, mining stocks need the commodity to increase in price for their shares to appreciate.

However, there are two precious metals that have seen a spectacular rise in prices since November: platinum and palladium.


Platinum was trading at approximately $1,545 in early November; now it’s just less than $1,700 an ounce, up 10%. Palladium has outperformed these other precious metals, as it was trading at $590.00 an ounce in early November, and it’s now at $750.00, up more than 28%!

When it comes to investing in mining stocks involved in extracting precious metals, it’s crucial to understand the underlying fundamentals of the commodity market.

Obviously, the two main determinants of price for precious metals are supply and demand. The precious metals of palladium and platinum are heavily used in the construction of catalytic converters. As many of you are aware, last year was an extremely strong year for car sales in many parts of the world. This is expected to continue through 2013.

While high-priced precious metals are causing a decline in jewelry demand, the large demand for automobile sales appears to be more than enough to compensate for any slack in the market. With interest rates so low in America, I don’t see a significant move up over the next six to 10 months, and this will continue to drive strong automobile sales in 2013.

According to automotive market research provider LMC Automotive Limited, in 2012, global car sales totaled more than 81 million units for the first time ever; and the research provider expects this number to rise to 83 million vehicles in 2013. (Source: Ibid.) This seems to be a logical estimate, as central banks around the world continue to provide easy monetary policy and data are showing that many of the world’s economies are beginning to accelerate.

On the supply side, South Africa is a massive producer of platinum and palladium. The country has suffered significant supply disruptions, impacting many mining stocks that are active in that region. According to Barclays PLC, platinum and palladium production will drop 2.7% in 2013, reaching a level not seen in 13 years. (Source: “Platinum Supply Falls to 13-Year Low as Mines Close: Commodities,” Bloomberg, February 5, 2013.)

According to the Department of Mineral Reserves in South Africa, mining stocks based in that nation closed nine platinum shafts in the second half of 2012. Part of that was due to labor problems, and some companies are reducing production to increase profitability. As costs rise for many mining stocks around the world, production must be curtailed to prevent losses. With the price of the precious metals rising, this helps alleviate some of the rising costs that the mining stocks are incurring.

As an investor in precious metals mining stocks, this information can be both positive and negative. Clearly, precious metals mining stocks located in South Africa might suffer additional problems if labor issues are not resolved. Even if the price of precious metals continues to rise, if the South African mining stocks are unable to extract the precious metals from the ground and can’t increase production, this does not help revenue growth.

One company that investors in mining stocks related to the precious metals platinum and palladium might be interested in researching further is Stillwater Mining Company (NYSE/SWC). The advantage of this precious metals miner is that its main mines are located in the U.S. While it does have properties in Canada and Argentina, clearly, the risks are far lower than those of South African precious metals mining stocks.


Chart courtesy of www.StockCharts.com

The stock has clearly outperformed many other precious metals mining stocks over the last several months. If the supply situation continues to remain tight and demand meets expectations, this should be extremely bullish for both the revenue and earnings of this company.

The real question to ask is: will the supply disruptions end anytime soon? Obviously, no one can predict the future, but this is not the first time that South African workers have caused disruptions. In addition, demand for automobiles is set for another strong year in 2013. I would certainly delve into the upcoming earnings release by Stillwater and take that information into account before considering any investment.

Source: http://www.investmentcontrarians.com/gold-investments/...

By Sasha Cekerevac, BA
www.investmentcontrarians.com

Investment Contrarians is our daily financial e-letter dedicated to helping investors make money by going against the “herd mentality.”

About Author: Sasha Cekerevac, BA Economics with Finance specialization, is a Senior Editor at Lombardi Financial. He worked for CIBC World Markets for several years before moving to a top hedge fund, with assets under management of over $1.0 billion. He has comprehensive knowledge of institutional money flow; how the big funds analyze and execute their trades in the market. With a thorough understanding of both fundamental and technical subjects, Sasha offers a roadmap into how the markets really function and what to look for as an investor. His newsletters provide an experienced perspective on what the big funds are planning and how you can profit from it. He is the editor of several of Lombardi’s popular financial newsletters, including Payload Stocks and Pump & Dump Alert. See Sasha Cekerevac Article Archives

Copyright © 2013 Investment Contrarians - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Investment Contrarians Archive

© 2005-2015 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Biggest Debt Bomb in History