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An Outlook on Palladium and Other Metals

Sean Brazney & Jeffery Christian
February 23, 2021
Video Transcript

Sean Brazney: Hello, my name is Sean Brazney, Sales Director for Monex Deposit Company. I am here today with Jeffrey Christian, Managing Director and Founder of CPM Group and one of the many analysts within the CPM Group of analysts and always great to have Jeffrey with us, incredible insight into the commodities market, and we’re very thankful for your time. Thank you for being with us Jeffrey.

You and I last year talked several times about platinum and I was very bullish as it traded between $800 and $1,000, anytime you can get back down into that $800’s, I was very adamant about an accumulation strategy and to add to your holdings. It looks like it has finally broken out this year. In fact, traded as high as around… well, it was trading at $1,256, I think, before I came in to talk with you. It looks like a fresh breakout. Is this something that we can look forward to moving forward?

Jeffrey Christian: We’ve been talking about it and CPM Group has had the view that we’re moving out of that $800 to $1,000 range and we’re probably moving to higher ranges. We thought that, obviously, a $1,000 was an important number. We’ve broken through that. We’ve broken through $1,100, and now we’ve broken through $1,200. Our expectation is that the price probably stays above $1,100 now going forward, with higher prices later. Our expectation is that maybe $1,150 to $1,250 is the range in near term and then as 2021 progresses, the prices probably move higher to say something over $1,250 on the high end with higher prices in 2021. Ultimately, we expect the prices to get well over $1,400, which would be a bigger move, but we think that that might take two or three years. One of the things that we’re seeing is a more rapid transition away from palladium to platinum in the auto catalysts. We’ve been talking about this and writing about it in the Monex reports for a few years and now it’s becoming a lot more apparent that it is in fact happening. Quite frankly, the recession which had devastated the auto industry in 2020, the recession is accelerating that transfer in the catalysts from palladium intense catalysts to more platinum intense catalysts.

Sean Brazney: In regards to recession, in fact, I was reading some information out of China, and I always suspect a little bit about of the information I’m getting out of China, but 25% year over year increase in car sales brings me to palladium. Palladium was one of the best performing precious metals for several years and seems to have been kind of locked at a range between $2,200 and $2,500, but with the increase in auto sales out of China, do you think that will help propel palladium up and out of this range?

Jeffrey Christian: Our view has been that palladium prices are going to stay strong. I’m not sure that they can rise that much further in the long-run. Obviously, yes, they can spike a bit higher. You know, we’ve had a number of investors like institutional investors and hedge funds who have come to us over the last twelve months as platinum has been recovering…reawakening and saying, “Well, should we sell palladium and buy platinum?” and our view universally has been, “No, you should buy platinum, but don’t necessarily sell palladium, and don’t sell it short and expect the price to drop.” Our expectation is the palladium price probably stays high. There still is a lot of palladium around. As I said, we are seeing that shift away from palladium into platinum on the fabrication demand side. I think that that will… it’s going to support platinum, but in doesn’t necessarily… it’s not that negative for palladium. So, our expectation is that palladium stays strong. Yeah, it can rise higher and it will rise higher, but I’m not necessarily as… I’m definitely not as bullish on palladium as I am on platinum.

Sean Brazney: Silver has been in the news quite a bit here lately and has reestablished itself above the $26 price. I do read a lot about the surplus; you know, above ground surplus out there in the marketplace for silver. With that surplus overhang, do you think that this break above $26 has some legs?

Jeffrey Christian: I think it does have legs. The thing about… well, there’s surpluses and then there’s inventories. It’s kind of funny, because we were talking earlier about tightness in one-ounce coins and small bars and medallions that investors buy. The reality in London, New York, Shanghai, and Zurich is that you have record inventories in gold and silver right now in those inventories, but you know it’s 1000-ounce silver bars and 100 and 400- ounce and kilo bars for gold. So, you do have an enormous amount of silver, but the point I would make is that, when the price went from $5 to $50, 1978 to 1980. When the price went from $5 in 2007 to $50 in 2011, you had more silver above ground. It’s transferred ownership and it’s shifted around, but that silver… the reality is you’ve had billions of ounces of silver in refined form— coins and bars, forever, and you used to have a lot more and it didn’t stop the price from going to $50, at least on a one-day basis. So, you look at those inventories and you say, “Yeah, they’re very big, but A) they’re a fraction of what they used to be, half of what they used to be probably in 1980, and B) they don’t stop the price from rising, they stop the price from continuing to rise, but the reality is that when the silver prices are rising those people who own all that silver say, “I’m not going to sell into a rising market. I might wait until the price peaks and then I might sell” or in many cases “I’m not even going to sell when the price has peaked and is falling again.”

Sean Brazney: How real insightful. Now, our report that you have put together for us and your group has put together for us, A Better Future With Precious Metals. That’s a lot of great details in there that we’ll have a chance to go over throughout the year with you. Hopefully, on camera for our viewers as well.

Remember Monex. Call Monex today. Talk to an account representative. Ask them for, A Better Future With Precious Metals report, as well as the other CPM reports that we produce. Thank you for joining us today.

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