Gold has been hot, real hot, and no one even uses it. Gold, unlike other metals, doesn't really have a use. People make jewelry out of it, but that's really it. We know that the base metals like iron, steel, copper, and zinc have heavy industrial uses in all sorts of things from infrastructure, transportation, and appliances. But even the other precious metals like platinum and palladium have uses.
Platinum is used in laboratory equipment, electrical contacts, electrodes, resistance thermometers, dentistry equipment, and even catalytic converters.
Palladium is used in computers, mobile phones, multi-layer ceramic capacitors, component plating, low voltage electrical contacts, SED/OLED/LCD televisions; and in destry, medicine, hydrogen purification, chemical applications, and groundwater treatment. That's a heck of a lot more than you can say for gold. Because pure gold is chemically unreactive, it's uses are limited. It does resist oxidative corrosion, but that's about it.
Now that you know about the metals, how do you play them?
As the platinum and palladium ETFs become available, we like North American Palladium, symbol PAL, and Stillwater Mining, symbol SWC. Think about the GLD, the gold ETF that tracks the price of gold. It has become the 6th largest holder of gold in the world! That’s more than Japan, more than China, More than the ECB, more than Russia, more than the UK, more than Venezuela. Ok, you get it, it’s holding a TON of gold. With the creation of the platinum and palladium it’s hard to imagine that those ETFs will not become large holders of those metals just as the GLD has done for gold.
Because platinum and palladium actually have uses in the real world, beyond jewelry, investor demand for these metals could push their prices up significantly. In order to play that, we are long SWC and PAL. Take a look. You can obviously wait for the ETFs to be issued, and trade on the US exchange, but we are going to play them directly through the miners as the miners are levered to the price of the metal and you’ll see them go down more on a decline and up more on a price gain.
For industrial metals we own Alcoa (AA), US Steel (X), and Nucor (NUE). You can play copper aluminum and zinc without stock by using the Powershares Base Metals ETF (DBB). We'll have a link to Powershares up soon on the MOF Home Page under Investor Tools on the Investor Education Section. You can get gold and silver from PowerShares in the DBP. They also have a miners ETF with PSAU.
Finally, for an individual Gold Miner, we do like BVN. The closer you get it to $30-$32 we think the better. It does have a small dividend, but their cash flow is great, nearly half a billion dollars and about 3 times as much cash on hand as they do debt on the balance sheet. That's always a great sign for us. Forward P/E is only a 13.94 so valuations are not stretched, although the current P/E is a 25. So, look for a pullback, or buy just a little here and build your position on pullbacks. You can own the equipment company Bucyrus International (BUCY) And don't forget about BHP Billiton Limited (BHP), probably the best Miner in the world.
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