Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Palladium Market Panic Buying - What Comes Next?

Commodities / Palladium Dec 06, 2018 - 03:33 PM GMT

By: MoneyMetals

Commodities

This week, a white metal reached a rare feat. Palladium has traded at a higher cost per ounce than gold.

Last month, the palladium market pushed through all remaining technical barriers by posting a new all-time high. A chronic supply deficit now threatens to launch palladium prices into a super spike.

A true shortage of physical metal may be at hand. The primary source of demand is automakers who require palladium for catalytic converters. Supply, meanwhile, comes primarily (more than 80%) from just two unreliable countries: Russia and South Africa.


On the London Bullion Market Association (LBMA) exchange, the palladium market is showing signs of extreme stress – even panic.

LBMA lease rates for palladium, which in recent years hovered barely above zero, have shot up to as high as 22%. That means palladium users are willing to pay loan shark rates just to be able to get their hands on this scarce commodity.

Could the palladium market be foreshadowing future developments in platinum, silver, and perhaps even gold? That question now figures prominently in the minds of metals investors.

Many silver bugs point to mining supply deficits as well as years of artificial price suppression as reasons to expect shortages and buying panics in silver. They may well be right.

However, the metal that tends to follow most closely in palladium’s footsteps is platinum. Both metals are used in catalytic converters. So when one gets substantially more expensive than the other, manufacturers have an incentive to switch.

Switching from palladium to platinum isn’t as simple as it sounds. With some modern high-performance catalytic converters, only palladium works. It can take up to 18 months for automakers to re-tool their production lines for a switch.

With platinum currently selling at a discount of more than $400/oz. to palladium, the economic incentives to substitute should start driving more demand to platinum. It will take place gradually – and the effect on price may be not be apparent for months.

Platinum May Be Poised to Follow Palladium

Patient platinum investors can look to history for some validation of the theory that platinum follows in palladium’s footsteps.

The last great shortage fear-induced panic buying spree in palladium occurred in 2000-2001. (It was only last month when palladium finally took out its 2001 high.) Palladium’s great bull market began quietly in 1997 at about $125/oz. Over the next four years, a cumulative 800% gain occurred.

By contrast, from 1997-2000, platinum went nowhere. It began trading at a discount to palladium in 2000.

By the time palladium prices peaked in 2001, platinum was sporting a $400 discount to its sister metal – the same as today.

What is next for platinum could be similar to what was next for it back then. By 2002, platinum prices caught up with palladium’s. Platinum proceeded to embark on an epic bull market – from under $500/oz to over $2,200 when prices peaked in 2008.

Of course, supply and demand fundamentals are different today. All the bullish news and momentum is in favor of palladium. It could, consequently, continue to outperform in the very near term.

There is, as yet, no supply deficit in platinum. But future platinum mining supply is very much in doubt. Market woes and rising political risk in socialist-controlled South Africa are forcing some of the world’s biggest platinum mines to scale back operations or shut down completely.

At some point, the price disparity between the two catalytic metals will simply become too great to be sustained. When the palladium:platinum price ratio finally reverses in favor of platinum, it will likely do so in a big way and trend in favor of platinum over a period of years.

The other white metal, silver, appears due to revert higher as well.

The silver:gold ratio recently dropped to a 25-year low. Like gold (and unlike the platinum group metals), silver has a long history of being used as money – making it especially desirable to have on hand in the event of a currency crisis.

Platinum is less commonly held by investors than is silver. Platinum bullion is available in the form of coins minted by a small number of government mints as well as privately minted bars.

The bottom line for investors is that a once in a generation opportunity now exists in the white metals. The same panic buying occurring in palladium today could be occurring in platinum and/or silver within the next few years.

Stefan Gleason is President of Money Metals Exchange, the national precious metals company named 2015 "Dealer of the Year" in the United States by an independent global ratings group. A graduate of the University of Florida, Gleason is a seasoned business leader, investor, political strategist, and grassroots activist. Gleason has frequently appeared on national television networks such as CNN, FoxNews, and CNBC, and his writings have appeared in hundreds of publications such as the Wall Street Journal, Detroit News, Washington Times, and National Review.

© 2018 Stefan Gleason - 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.


© 2005-2022 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