Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Stock Market Rip the Face Off the Bears Rally! - 22nd Dec 24
STOP LOSSES - 22nd Dec 24
Fed Tests Gold Price Upleg - 22nd Dec 24
Stock Market Sentiment Speaks: Why Do We Rely On News - 22nd Dec 24
Never Buy an IPO - 22nd Dec 24
THEY DON'T RING THE BELL AT THE CRPTO MARKET TOP! - 20th Dec 24
CEREBUS IPO NVIDIA KILLER? - 18th Dec 24
Nvidia Stock 5X to 30X - 18th Dec 24
LRCX Stock Split - 18th Dec 24
Stock Market Expected Trend Forecast - 18th Dec 24
Silver’s Evolving Market: Bright Prospects and Lingering Challenges - 18th Dec 24
Extreme Levels of Work-for-Gold Ratio - 18th Dec 24
Tesla $460, Bitcoin $107k, S&P 6080 - The Pump Continues! - 16th Dec 24
Stock Market Risk to the Upside! S&P 7000 Forecast 2025 - 15th Dec 24
Stock Market 2025 Mid Decade Year - 15th Dec 24
Sheffield Christmas Market 2024 Is a Building Site - 15th Dec 24
Got Copper or Gold Miners? Watch Out - 15th Dec 24
Republican vs Democrat Presidents and the Stock Market - 13th Dec 24
Stock Market Up 8 Out of First 9 months - 13th Dec 24
What Does a Strong Sept Mean for the Stock Market? - 13th Dec 24
Is Trump the Most Pro-Stock Market President Ever? - 13th Dec 24
Interest Rates, Unemployment and the SPX - 13th Dec 24
Fed Balance Sheet Continues To Decline - 13th Dec 24
Trump Stocks and Crypto Mania 2025 Incoming as Bitcoin Breaks Above $100k - 8th Dec 24
Gold Price Multiple Confirmations - Are You Ready? - 8th Dec 24
Gold Price Monster Upleg Lives - 8th Dec 24
Stock & Crypto Markets Going into December 2024 - 2nd Dec 24
US Presidential Election Year Stock Market Seasonal Trend - 29th Nov 24
Who controls the past controls the future: who controls the present controls the past - 29th Nov 24
Gold After Trump Wins - 29th Nov 24
The AI Stocks, Housing, Inflation and Bitcoin Crypto Mega-trends - 27th Nov 24
Gold Price Ahead of the Thanksgiving Weekend - 27th Nov 24
Bitcoin Gravy Train Trend Forecast to June 2025 - 24th Nov 24
Stocks, Bitcoin and Crypto Markets Breaking Bad on Donald Trump Pump - 21st Nov 24
Gold Price To Re-Test $2,700 - 21st Nov 24
Stock Market Sentiment Speaks: This Is My Strong Warning To You - 21st Nov 24
Financial Crisis 2025 - This is Going to Shock People! - 21st Nov 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

PALLADIUM - THIS Is What a Run on the Bank for Precious Metals Looks Like…

Commodities / Palladium Feb 13, 2020 - 04:03 PM GMT

By: MoneyMetals

Commodities

The explosive price action seen in palladium recently is indicative of a physical shortage.

Put simply, available inventories are failing to keep up with demand (largely from the automotive industry).

According to Refnitiv GFMS, the palladium market will be under-supplied by 883,000 ounces this year.

Stresses on the physical market are showing up in spiking lease rates, illiquidity, widening bid/ask spreads, and disconnections between quoted spot prices and actual physical prices. Most importantly, the deficit in palladium supply is manifesting in the form of rising prices.



Palladium hit a record, briefly touching the $2,500 level last month. And despite selling off a little in recent days, Bank of America Securities analysts see the metal’s chronic supply deficit pushing prices up to $3,500 an ounce before the bull market ends.

The point of this article, however, isn’t to promote palladium as a great buy at these lofty levels. Chasing an uptrend this late into its potential blowoff phase is risky.

When metals markets top, they don’t merely level off. They tend to reverse violently.

That said, the opportunity palladium presents for metals investors is that it charts a similar path forward for platinum and silver (and to a lesser extent gold, which shouldn’t be expected to move as dramatically).

Since 2016, when palladium began the year trading around $500/oz, prices have quintupled.

Silver bottomed in 2016 just below $14/oz. Prices advanced strongly that year before falling back into a major trading range.

A quadrupling would take silver over $50 – and that would likely just be the warm-up phase that finally establishes new all-time highs. Then the explosive phase will begin that sees new high after new high, week after week – just like we’ve seen in palladium over the past year.

As yet, there isn’t much evidence that is happening. But the longer a price gap of more than $1,000 between the two catalytic metals persists, the more motivated automakers will be to embark on redesigns of existing equipment to accommodate much cheaper platinum.

Major automakers such as BMW are investing heavily in hydrogen-electric fuel cell technology as a way of meeting zero-emissions goals. Once too expensive to be practical, costs for fuel cell powertrains are expected to become competitive with conventional powertrains over the next few years.

The upshot for platinum is that it is used in the hundreds of small cells that make up a fuel cell stack. If fuel cell vehicles catch on, demand for platinum could go into overdrive.

In the meantime, the ongoing run on the physical palladium bank will be something to behold. It’s exactly what many gold and silver bugs who have been calling out paper manipulation and price suppression schemes have been predicting.

Although the markets for gold and silver remain relatively quiet now, they could soon become energized by palladium and the larger exposure of futures markets that produce multiples more contracts for physical metal than can ever be delivered.

Precious metals analyst Craig Hemke wrote recently, “Understand that palladium, just like gold and silver, is overseen by the bullion banks, which are responsible for physical delivery in London… The Banks manage a fractional reserve system of just in time physical delivery. As gold and silver investors, we await the day when a ‘run’ on these bullion banks exposes the lack of physical metal behind this system. The current price action in palladium suggests the possibility that this ‘run’ may have already begun.”

If you happen to own physical palladium, you’re in the driver’s seat. You can sell anytime to a dealer like Money Metals or hold out for a desperate buyer who may be willing to pay a sizeable premium over spot just to get his hands on some ounces of the scarce metal.

When there is a run on the bank for silver, we expect many types of coins and other bullion products to command unusually large premiums over spot.

The most susceptible to large premium spikes are no-longer minted historic coins such as pre-1965 90% silver dimes, quarters, and half-dollars.

The good news is that they and most other silver bullion products can currently be had at very low premiums over spot prices. You’d be wise to stock up while fantastic bargains can still be had…then hang on tight for the ride ahead.

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.

© 2020 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