Precious metals have had it tough this year.
Gold and silver have both taken a lashing, dropping 30% and 52% respectively from their 2011 highs.
Platinum hasn’t fared much better. It’s off some 21%.
But one metal that shown remarkable resilience in today’s environment: Palladium.
Even when negative news ripples through the metals market, palladium finds a way to bounce back quickly when its counterparts lose steam.
And it’s not hard to see why…
For one, it’s scarcer than both gold and silver and it’s extremely functional.
It’s found in everything from smartphones to flatscreen TV’s, but only 6.5 million ounces are produced worldwide each year (a far cry from the 700+ million ounces of silver produced last year).
And because such high quantities of it are consumed each year, production has had trouble keeping up.
Supply deficits from leading producer Russia are helping to keep demand (and prices) elevated.
Not only that, but this metal is a key component for an important economic indicator: the auto industry.
You see, one of the most vital parts in almost every car or truck on the road is the catalytic converter, or muffler.
This device regulates vehicle emissions by converting the toxic exhaust from a vehicle’s engine into less harmful pollutants.
Without these converters, we’d all be breathing in a whole lot of noxious air.
And the main ingredient responsible for the chemical conversion?
In fact, the auto industry is so vital to the palladium market that it accounts for about two-thirds of palladium’s demand every year.
Now here’s why I’m bullish on this metal: new vehicle sales are on a tear.
Led by the Chinese, global sales are expected to reach an historic high this year, according to the Scotiabank Global Auto Report.
Last year, nearly 65 million new cars were sold around the world – that number is on track to rise to 67.74 million.
General Motors Co. (NYSE:GM) estimates US sales could top 15.5 million units in 2013.
China is expected to rival the US in sales this year with a similar amount.
Britain as well, is seeing new car sales jump. The Society of Motor Manufacturers and Traders forecasts sales in the UK to jump 8.4% to 2.22 million this year.
This resurgence in the auto industry should ensure palladium demand stays high for the remainder of 2013 and likely beyond.
Now for the important part…
Best Palladium Stock to Own:
Here are two ways for you profit from the rising palladium market.
First, is to own an ETF such as the ETFS Physical Palladium Shares ETF (NYSE:PALL).
Over the past year, PALL has risen 25% on the strength of growing demand and decreasing supplies.
With the way palladium’s been performing this year, I see plenty more upward momentum for this ETF.
On the company side, I think the best palladium stock to own is North American Palladium Ltd. (NYSEMKT:PAL).
This Canadian junior miner operates at its flagship LDI mine and mill in Ontario, Canada. It’s one of the very few palladium mines that exist outside of Siberia and South Africa.
In fact, LDI is one of only two primary palladium producers in the world and has been producing since 1993.
Last year, the complex extracted 163,000 ounces of palladium. It’s currently undergoing a major expansion to help the company reach its production goal of more than 250,000 ounces per year.
In addition to aggressively raising production by 60%, the company is also aiming to lower production costs to sub-$300 per ounce by 2015 (compared with $490 in today’s prices).
With palladium prices poised to rise higher on the strength of a healthier auto sector, PAL has significant long-term upside for the years ahead.
Mark my words: palladium is on a rare bull run in an otherwise frothy metals market. Investors looking to cash-in on this ride should consider North American Palladium (PAL:NYSEMKT) as today’s best palladium stock to own.