When Ronald Reagan shouted across the ages admonishing Mr. Gorbachev to tear down his wall, few at the time believed it was possible.
But maybe the president knew more than he was letting on. Because, to the surprise of so many, the once-feared Soviet Union landed on the ash heap of history virtually an instant after his famous speech.
But while the days of an acromyn-laden and dangerous Cold War world have thankfully become nothing but a distant memory, a new gangsta-capitalist Russia has emerged, seeking to cash in on its resource riches.
And while you may be familiar with Russian efforts to impose its energy will on Europe through its massive natural gas resources or its efforts to play a resource-loaded geopolitical game with the Shanghai Co-op, you may not know about its wealth in palladium, a precious metal that has grown in popularity over the past few years among precious metal investors.
The biggest supplier of palladium in the world is Norilsk Nickel in the Russian Federation. A full 50% of the world's palladium is produced by the company, and for them it holds the key to future riches.
What is Palladium?
Palladium is a rare silvery-white metal that is sometimes bought as a cheaper alternative to platinum. This is because palladium belongs to a group of six metals that have similar physical and chemical properties called the Platinum Group Metals (PGMs), or sometimes Platinum Group Elements (PGEs).
In total, platinum group metals include ruthenium, rhodium, osmium, iridium, platinum, and palladium.
Palladium is tarnish resistant, electrically stable, and resistant to chemical erosion as well as intense heat. The metal's unique properties account for its widespread use. It is estimated that one in four goods manufactured today either contain platinum group metals, or had platinum group metals play a key role during their manufacturing process.
Over half the total supply of palladium, and its sister metal platinum, goes into the manufacturing of catalytic converters, which convert up to 90% of harmful gases from auto exhaust into less harmful substances. This makes the value of the metal susceptible demand from in the automobile industry.
When palladium is at room temperature and atmospheric pressure, it can absorb up to 900 times its own volume of hydrogen, which makes palladium an efficient and safe storage medium for hydrogen and hydrogen isotopes. As a result, palladium plays a key role in the technology used for fuel cells, which combines hydrogen and oxygen to produce electricity, heat, and water.
Palladium Hydrogen Fuel Cells
Hydrogen will one day replace petroleum much the same way that wood was displaced by coal and coal by oil. And palladium's role in this transformation is in its vital properties, which make it indispensable in the development of the hydrogen fuel-cell technology that will revolutionize the way we think about energy.
Its ability to work as an efficient catalyst in proton exchange membranes makes it crucial to the process of creating energy from hydrogen.
Palladium-laden membranes will eventually make fuel-cell power systems much more widely available to consumers by reducing the manufacturing costs of fuel processors and hydrogen purification devices.
But perhaps more importantly, the metal itself is like a hydrogen sponge. As I mentioned, its properties allow it to absorb more than 900 times its weight in hydrogen!
This is important because one of the biggest hindrances to the implementation of this technology has been the problem of safely storing enough hydrogen fuel to match the amount of gasoline that an auto can carry today.
Palladium's amazing ability to soak up hydrogen seemingly solves this problem. And it is much safer and more effective than storing an equal volume of hydrogen in a highly pressurized tank.
In fact, the U.S. thinks so highly of these properties that we have recently taken out a patent on a hydrogen storage method using the metal.
And when it comes to seeing a bright future for palladium, the U.S. is hardly alone.
Not only does Norilsk Nickel mine the bulk of the world's supply, it has also begun to play a major role in developing palladium using fuel cells.
Just last spring the company and its partners made a stunning $217 million cash investment in Plug Power [NASDAQ: PLUG] to better position itself to profit from the emerging hydrogen economy. This investment and other stock buys have given Norilsk approximately 35% of Plug Power's stock.
"Norilsk Nickel has long supported fuel-cell technology research, and our investment in Plug Power demonstrates this commitment," said Michael Prokhorov, director general of Norilsk. "We believe in Plug Power's potential, and in the potential of the hydrogen economy, and look forward to helping Plug Power continue its advances in fuel-cell technology."
Norilsk is betting that Plug Power's established leadership in the deployment of clean, reliable energy products can earn it profits both as an investment and as a future market for its own palladium.
And despite what you may believe about the introduction of fuel cells to market, Plug Power and companies like it have been providing their products to hospitals, hotels, nursing homes, office buildings, schools and utility power plants for some time now, either for primary or back up power.
Its largest growing market is residential. Fuel cells are being used as primary and backup power for homes.
And it won't be long before all of the major automobile manufacturers manage to deliver cars and trucks using fuel cells.
Just last month, General Motors revealed that it expects to be producing such vehicles by 2010. Interestingly enough, the company noted that storage was no longer an issue for its products.
Some analysts in Europe even predict that there will be some 6,000,000 hydrogen-powered autos there by 2020.
While the market for palladium is as strong as ever thanks to its uses in catalytic converters and its acceptance as the metal of choice for the developing hydrogen economy will make it even more valuable in the future.
A future that is closer than you think.
Like the Soviets of old, the days of our oil economy are numbered.
It may be hard to fathom now, but it is true. Those oil-laden walls can't stand forever either.
Our dependence on oil is headed for a historical ash heap of its own, and palladium will likely play a big part in its replacement...even if we have to buy it from those ex-Soviets.
Investing in Palladium
Like other precious metals, the traditional way to invest is buying palladium coins and bars.
Two of the most popular palladium bullion products right now are the Canadian Palladium Maple Leaf Coins and the Pamp Suisse Palladium Bars.
Palladium coins and bars can be bought and sold like any other precious metal. However, liquidity of direct palladium bullion investment is not as good as gold and silver due to low circulation of palladium coins and wider spread between buying and selling price.
Investors can also trade palladium futures. Futures contracts on palladium are actively traded on the NYMEX Exchange.
Palladium prices peaked near $1,100 per ounce in January 2001 driven mainly on speculation of the catalytic converter demand from in the automobile industry. It subsequently fell to $145 in April 2003.
Current palladium prices are hovering around $330 but could go much higher if investor demand picks up. Don't sell your gold to buy palladium. But it couldn't hurt to add a small bit of the metal to your portfolio.
Good Investing,
Luke Burgess
Editor, Gold World
Investment Director, Secret Stock Files
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