Palladium Proceed With Caution: PGMs Platinum Group Metals Junius Maltby
Published on Sep 29, 2017
Junius Maltby channel discussion on the PGMs and recent performance of Palladium. Palladium has surpassed Platinum in dollar denominated valuation, as it is driven by industrial and the automotive industry. Join the channel discussion!
Funny, I've been looking at 10 Yr. 5 Year and Yearly PD, PT, AU, AG charts recently.
PD is the only metal of the group that has not had significant pullback in the charts since it's rise to fame. I believe when I first looked at buying it, it was priced around
175$ 200$ - I could tell you exactly later on.
Yet in any case that is one of the main reasons if not the only I would be semi reluctant to buy PD @ just under a G note! WOW.
On the flipside just to play devil's advocate it is the only metal that has retained much if not all of it's breakout - even now surpassed serious resistance in the shape of 800 / 850.
Could be a wild ride up further.
I would however wait for a test of broken resistance before pulling any triggers!!!!
I'll post a chart later on.
Good luck - Happy Hunting
Platinum was once the most precious of metals. For decades, it traded at a premium to gold. The other platinum group metals – palladium and rhodium – barely registered on investors’ radar screens.
Platinum lost its crown to gold in 2015. It was overtaken by the other PGM metals in recent weeks.
Given that platinum, palladium, and rhodium demand is largely driven by automobile manufacturing and the production of catalytic converters, one of these things is likely true; platinum is currently undervalued, or the other two have gotten ahead of themselves.
1 oz rhodium bars run about $1,455 each.
Which one is the correct assessment will depend on whether the current optimism for economic growth in both developed economies and emerging markets has been well placed. Either way, investors inclined to speculate on the PGM metals have some interesting market action upon which to trade.
Platinum does look remarkably underappreciated. It is hard to imagine it trading at a significant discount for too long.
Auto makers should bid for whichever metal offers the lowest cost as all three are somewhat interchangeable.
Platinum offers the largest and most liquid market of the group. It is widely available in a variety of coins and bars. For investors, platinum’s liquidity is a consideration.
However, momentum traders may want to take a look at rhodium. It is traded in relatively tiny quantities and has a history of making big moves. Rhodium saw a top near $4,000 in the early 1990s and it made a run north of $2,000 about 10 years later. It peaked at $10,000 per ounce in 2008.
Although rhodium has doubled in the past year, it currently trades just over $1,300.
The metal’s pattern of having a sharp spike roughly once every 10 years is interesting. It is possible we are in the middle of another of those massive moves now.
Rhodium is available primarily in 1 ounce bars. While the quantity of rhodium traded is by far the lowest among precious metals, market liquidity for that metal has seen a boost since 2008. There are now a couple of ETFs focused on the metal. Those ETFs may in fact be driving a good portion of the recent demand.
Clint Siegner is a Director at 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 Linfield College in Oregon, Siegner puts his experience in business management along with his passion for personal liberty, limited government, and honest money into the development of Money Metals' brand and reach. This includes writing extensively on the bullion markets and their intersection with policy and world affairs.
you would think so......but.....it does seem to be quite buoyant over the past year unlike the other more common precious metals ....i would much rather hold metals that are acting this way vs slow to rise quick to fall metals...that being said Pd has just been a distraction metal for me to hold and i am seeking to sell enough of the metal i hold to cover my initial entry cost making the ride free....
Platinum Bullion ‘May Be One Of The Only Cheap Assets Out There’
-- Published: Wednesday, 8 November 2017
Platinum “may be one of the cheap assets out there” and “is cheap when compared with stocks or bonds” according to Dominic Frisby writing in the UK’s best selling financial publication Money Week.
Platinum Bullion in USD (15 years)
Frisby writing in Money Week laments the total absence of value in today’s markets. He then identifies an asset that is both cheap (on a relative basis) and is valuable and the article is well worth a read:
The value investor’s lament – where have all the cheap assets gone?
Every week in MoneyWeek magazine there’s a small column devoted to great investors from the past. You read a bit about who they were, what their circumstances were and what their methodologies were.
Sometimes I’ve heard of them, sometimes I haven’t – but as often as not it seems that they were a value investor of some kind. Value investing is, I suppose, the most basic and instinctive of investing systems. You buy when you deem something to be cheap and you sell when it gets expensive. The principle has been applied for as long as humans have invested money.
And yet it no longer seems to work. In this modern age of suppressed rates, quantitative easing, and easy (if you mix in the right circles) money, nothing is cheap – except money itself.
Value investors have, mostly, been beaten by index trackers, and those who have simply gone long (ideally with as much leverage as possible), have wiped the floor with the prudent. Sensible, disciplined approaches have not worked. The stock market has flown and taken everything with it.
As I went for my daily walk yesterday, I asked myself: “What out there is actually cheap at the moment?”
Finding value has become increasingly difficult
It depends on your valuation matrix, of course, but it’s hard to make the case that stocks are cheap. The Dow, the S&P 500, the Nasdaq – they are all at all-time highs, pretty much. I’m not saying they can’t go higher. But all-time highs is not cheap.
The various FTSE indices are also in record territory, same too France and Germany. Japan is at 20-year-plus highs. On a country-by-country basis you might be able to argue somewhere is cheap – Greece (for a reason) – but it’s hard to say there is real value out there in stocks as an asset.
The same goes for bonds. The yields on government bonds are, except for exceptional cases, minimal. As low as, 2016 excepted, they’ve ever been. Again, yields could fall – bonds could get even more expensive – but you can’t make the case that government bonds are cheap. The same goes for corporate and junk bonds.
In the UK, the real estate market has two sides to it. In places like London, Brighton, Bristol, Oxford or Cambridge, prices bear little relation to local earnings.
Then there are other regions where the 2007 highs were never recovered. You could find value in, say, parts of the Midlands or North Devon. But that’s not the same as being irresistibly cheap. Moreover, the future for UK real estate investing does not look good to me – it seems the government does not want to encourage it beyond owning your own home.
You start looking at other assets: bitcoin and digital assets. Nope. Not cheap. Art. Nope. Not cheap either.
The only asset class that’s cheap right now
About the only assets I can find that are cheap are in the commodities sector. Oil looks reasonable value. I’m writing this piece from Texas, and I can tell you that oil consumption shows no signs of abating.
But the real zinger for me is platinum.
It’s as though the kid at school, who used to get straight As in all his grades and be captain of all the sports teams, has suddenly for no apparent reason, been relegated to the back of the class. He’s politely putting his hand up and saying, “Hey, remember me?” but nobody cares. They’re all ignoring him.
Back in the day, platinum was the star. It was a precious metal, so it would benefit from all the inflation of the 2000s. But it was an industrial metal too, so it would benefit from the industrial expansion. Rare, beautiful, hard to produce. What could possibly go wrong?
The world blows up and gold and silver go to the moon – platinum goes there too. The global economy expands, everybody has more money – one thing they spend their new-found wealth on is platinum jewellery. It’s more precious than gold after all. People start driving more. More cars = more platinum.
Instead, platinum has gone nowhere, and it’s been forgotten.
The body blow seems to have been the Volkswagen scandal. Diesel emissions are greater than stated. The future for diesel cars (which use platinum in their catalytic converters), and thus the future for the precious metal, looks grim.
Meanwhile, the whole “gold as money” narrative has upped sticks and and moved to bitcoin. Central banking works apparently, and so there is no need for precious metals.
And the wealth created by the economic expansion of the past few years has not trickled down into platinum jewellery buying sufficiently to affect the price. The money must have all gone to rich folk who already own platinum!
Any strike or mishap in South Africa that might affect platinum supply (something like 90% of platinum is mined there) has just been met with a global shrug.
Platinum is simply too cheap
Well, let me tell you a thing or two, Mr Market, who doesn’t care about platinum. You’re wrong!
Gold (at around $1,290 per ounce) is now about 40% more expensive than platinum (around $925). That is not normal. Platinum is supposed to be more expensive than gold. Gold is typically 75% of the price of platinum. To redress that balance , platinum should be around $1,600.
Platinum’s cheap little sister palladium (which is a law unto itself) is now more expensive than platinum. Again, that is not normal. It happens every now and then – well, once since 1970, in 2000-2001 – but it is the exception, not the rule. It’s like a BMW – nice, but not that nice – costing more than a Rolls Royce.
Platinum is cheap when compared with stocks or bonds. It is sitting around or just below its cost of production, which is going to strain supply (in fact it already has).
Who cares about platinum? Nobody really. It’s amazing that a metal this embedded in our collective psyche is meeting such apathy.
The chart below shows the platinum price over the last ten years.
You can see the steady decline from 2011 through to 2016, the brief rebound rally, and then further declines. But those further declines have been with much more of sideways bias. In other words, although there aren’t many buyers, the hard selling seems to be done.
I get why nobody is buying platinum – there’s no compelling narrative for it at the moment. There’s no reason to buy it beyond that it’s cheap. But nor is there any real reason to sell it.
There’s often a cycle to bear markets. First you get the hard selling, then you get the forgotten phase – when an asset is simply overlooked. It seems we are in such a phase now.
Although we need not see a huge rise in the near-time, I would say the downside risk here is limited in a way that it isn’t in other asset classes – stocks, bonds, bitcoin – where the downside risk is fairly substantial.
It’s a case of accumulating and sitting patiently. Which is what value investors do.
Note: The safest ways to own platinum is with platinum coins, platinum bars (delivery and Secure Storage) and platinum certificates all of which are offered by phone by GoldCore. They will be available for online purchase when our new website goes live in the coming days.
Is Platinum a crouching tiger (or lion!?) - Lets talk metal prices for 2018! Backyard Bullion
Published on Jan 3, 2018
Please note: I am not a financial adviser. These are my thoughts and opinions on the precious metals market. What is said in this video is not financial advise and Backyard Bullion cannot be held responsible for any financial decisions you make after watching this video. Always research and seek financial advice from a qualified professional.
Palladium Prices Surge To New Record High Over $1,100 On Supply Crunch Concerns
-- Published: Thursday, 4 January 2018
– Palladium prices surge to new record high over $1,100/oz today
– Palladium surges past record nominal price seen in 2001 after 55% surge in 2017
– Best-performing precious metal and commodity of 2017 is palladium
– Palladium prices top platinum prices for first time in 16 years – Strong Chinese car demand and switch from diesel to petrol cars sees demand surge – Supply crunch as six year supply deficit & 2017 deficit expected to hit 83,000 ounces
– Palladium supply crunch to intensify if world’s leading producer Russia restricts supply and investors diversify into tiny palladium bullion market
Editor: Mark O’Byrne
Palladium prices surged to a new record nominal high today, over $1,100 an ounce on growing concerns of a supply crunch in the very small physical palladium bullion market. It is important to remember this is a nominal record high and adjusted for inflation, palladium prices would have to reach over $1,400 per ounce in order to surpass the 2001 record high.
Nymex palladium futures for March delivery increased by 2.5% to $1,087.35 yesterday after hitting $1,090.45, ‘the highest for a most-active contract in records going back to 1986’ according to Bloomberg.
Palladium prices very strong performance can be attributed to two main, complementary factors: falling supply and increased demand in the automotive industry. It has also benefited from a weak dollar, expectations of future market changes and geopolitical risk and tensions with Russia.
The palladium market has seen a supply deficit for six of the last seven years. In 2017, the deficit was expected to reach 83,000 ounces.
In contrast, the platinum market has been in over supply, a situation which is expected to continue well into 2020.
According to Nymex tracked warehouse inventories shrank 25% in December. This marked the fourth consecutive annual decline.
The majority of the world’s palladium supply – over 80% by some estimates – are found in just one country, Russia. This in itself could complicate matters when it comes to supply as we have covered in the past.
Russia has restricted supplies of valuable and strategic natural resources, such as natural gas, in the past and geopolitical tensions and resource nationalism could see it do so again. This would lead to much higher prices in a very small, finite physical market that is already in deficit.
After years of hearing about the benefits of diesel engines and enjoying tax breaks from governments, motorists are now doing an about-face turn and embracing petrol engines which are now reportedly better. This is in part thanks to palladium which helps to combat emissions from such engines.
Diesel market share in Europe has been under pressure since carmaker Volkswagen admitted in 2015 that it had used illegal software to cheat U.S. emissions tests, slipping below 50 percent the following year for the first time since 2009, as reported by Bloomberg.
Kieron Hodgson, analyst at Panmure Gordon, told the Telegraph that palladium’s recent surge was directly connected to “the demise of the diesel engine and the resurgence of gasoline.” Forecasters expect the number of diesel engines to halve over the next ten years.
Some of the 17-year highs seen in the 2017 palladium price came on the back of expectations that demand in the automotive industry is going to keep climbing.
Much of the demand for cars has come from an uptick in car sales in both the US and especially China. Approximately 78% of palladium supply is used in the automotive sector. Whilst this may seem to be painful news for the likes of platinum (used in diesel cars’ catalytic converters) it at least has the benefit of diversification.
Approximately only 43% of mined platinum is used in catalytic converters, while around 30% goes into jewellery. The balance is split between the likes of electricals and chemicals.
Unsurprisingly, manufacturers are likely to begin seeking alternatives to palladium given the costs and limited supply. This is where platinum may benefit as it can also be used in catalytic converters.
Will the record breaking continue?
2018 may see a calming in the palladium market and a correction could be expected given the scale of price gains in 2017. However, it is not expected to have a dramatic impact on price. Whilst the market may currently seem both overheated and over-speculated the fundamentals that are driving the price are unlikely to change in the next twelve months.
After all, there is little anyone can do to boost supply and demand shows little sign of abating imminently.
When we are told that we should invest in precious metals then we primarily think of gold and silver. The truth is, that we should consider platinum and palladium which are, like silver, industrial commodities and can play a significant and beneficial role in portfolio diversification.
In terms of holding palladium in your portfolio, there is now research showing the diversification benefits of investing in palladium and platinum bullion.
Platinum and palladium in the long-run
Using data from 1914 to 1996 to assess the inflation hedging ability of the white precious metals Taylor (1998) finds that platinum and palladium ‘served as a long-run inflation hedge, while evidence also points towards the short-run hedging abilities of platinum.’
Which trading strategy should I use?
By examining the daily price of silver between January 1968 and March 2016 and the daily price observations of platinum and palladium between April 1990 and March 2016, Almudhaf and Al Kulaib (2016) conclude that a traditional buy-and-hold strategy outperforms an attempted market timing strategy
The white precious metals are increasing in importance
Fernandez (2017) also finds that ’the rise in importance of the price of white precious metals and consumer confidence and exchange rates in the United States, [is] in line with the rise in importance of white precious metals as an investments asset.’
There is a strong case for having an allocation of some 20% to 30% of an investment or savings portfolio in physical precious metals. The majority of this should be in gold and silver but as we have seen the academic research shows that having smaller allocations – maybe 5% and 5% – to platinum and palladium – will also have diversification benefits.
Investors would be prudent to consider an allocation to all four precious metals, and rebalance when there is outperformance, in order to maximise the safe haven aspect and return of their portfolio.
In order to benefit from the safe haven qualities or precious metals, investors should opt for physical bullion in the form of coins and bars and opt for allocated and segregated storage as provided by GoldCore for gold, silver, platinum and palladium bullion.