Platinum, Palladium—The New Hot Metal Trades?
With silverprices tumbling for a third straight session, traders are questioning if its record-breaking rally in recent months is finally over.
One analyst seems to think so, and is recommending that investors look beyond silver, and even gold investments
"I would more so like to see people invest in platinum, in palladium," Erik Wytenus, Head of Foreign Exchange and Commodities at J.P. Morgan Private Bank told CNBC on Wednesday.
Wytenus says positions in silver have become stretched as investors piled in on the commodity as a means to diversify within the precious metals space. Silver prices have soared 33 percent since the start of the year before the CME intervened last week to curb speculative buying, with three increases in margin requirements.
"Nothing goes up in a straight line forever," he cautioned. And with silver's volatility being 2.5 times that of gold, largely due in part to its smaller market size, Wytenus warned investing in silver was "not for the faint of heart".
Platinum and palladium , on the other hand, have more supportive price conditions, he noted, with 90 percent of platinum's supply and 87 percent of palladium's supply coming from just two countries - Russia and South Africa.
"Any potential disruptions in these countries delivering the needed metals to market represent upside price risks," he said.
The increased demand for cars spurred by a growing middle class is also supporting the appetite for the metals, Wytenus added. Palladium and platinum are used in the production of catalytic converters for vehicles.
"We love the linkage to the automobile theme," he said. "As individuals move up the ladder of one level of socioeconomic status to another, particularly in emerging market nations where the middle classes are growing quickly, more and more catalytic converters will be needed for these cars."
The deepening pockets of this middle class are also spurring the demand by platinum jewelry, responsible for a third of the metal's demand, Wytenus said.
He expects palladium prices to rise by 13 percent to hit $875 by the end of the year; and platinum, which has done relatively better than palladium this year, to hit $1,900, representing a 3 percent increase.