Platinum and Palladium Now
Jeffrey Christian:Now, turning to platinum and palladium and I really want to focus on platinum, because I think that’s the great place for investors. Palladium is interesting, but the price is already high. The price of palladium has been rising steadily since 2015, 2016, it’s at record levels—it’s gotten up to $3,000. Our expectation is that the price will trade between $2,500 and $3,000 for the rest of this year and into next year. We do think that the prices will stay strong, but they’re at record levels. Now, palladium today, as I’m speaking, is about $2,600. So, a move to $3,000 is a pretty good move on a short-term basis for somebody who wants to be or join and come in and out of the market. The palladium is there. We have seen a surplus last year, because of the economic lockdown. That surplus is gone. We have a deficit, a short fall of newly refined palladium relative to fabrication demand this year, and we have… we have big deficits going forward. So, the palladium market is going to remain tight and prices are going to stay high and that’s a good thing for palladium from an investor’s perspective.
Platinum, I think, offers much more price appreciation. Platinum was sort of dead in the water, to be crude, between $800 and $1,000 for most of the time from 2015 until 2019, early 2020. It had a couple spikes above $1,000, maybe one spike a below $800, but basically platinum has been trading in that range. It has now broken above $1,000 in early 2021 and it seems to be firmly stabilized above $1,000. Our expectation is that the low is probably $1,035 for the next six months or so, yeah it could spike down a little bit lower, but there’s support at $1,000 and we think $1,035 probably holds. On the high end, we wouldn’t be surprised to see the price move toward $1,200 and to basically trade between say $1,050 and $1,200 for the rest of this year. The platinum market had a large surplus last year, the surplus is less than half of what it was last year… this year, and it’s headed towards large deficits on a persistent basis in 2022 and going forward. These metals are used, as I said, primarily in auto catalysts to clean up the exhaust of petroleum-based fuel vehicles and that’s not going away. In fact, what we’re seeing is a cyclical recovery in the auto industry on a global basis. It’s changed, because of economic and demographic changes, but it’s still there. Now, you may be hearing people talk about how there’s this rapid transition to electric vehicles that’s going to supplant gasoline-based and diesel-based vehicles and you won’t need PGMs to clean up the exhausts. The market penetration of electric vehicles has gone very rapidly, it’s gone from 1% five years ago to about 4% this year, 3% or 4%, that means that 96% of the cars are still burning gasoline or diesel and still using platinum group metals. Going forward, you see these incredibly optimistic projections for market penetration rates for electric vehicles, which don’t stand up to scrutiny, if you analyze them. The capital expenditures to build the factories to make all the components for electric vehicles is not there and is constrained, the electricity supply is constrained, and the grid’s stability is constrained. So, there are a lot of things that will cause the movement to electric vehicles to be much slower than some politicians and marketing people would have you believe and if you talk to the auto industry, you’ll find senior executives publicly talking about a rapid transition of their vehicle fleet to all electric or electric and hybrid vehicles, but if you talk to the engineering, design, and development people, they say, “We can’t move that fast.” There’s a sort of aspirational, or political, or socially motivated comments that we will strive for, but it’s not going to happen that fast. Even if it happens as fast as they say, you’re still going to have 60-65% of the vehicles being made and sold in the world using gasoline or diesel ten years from now, 15 years from now. So, there’s going to be a continued period of time when we need platinum, and palladium, and rhodium, to clean up that exhaust, and the platinum, palladium, and rhodium mining industry probably is not geared up to supply that metal over the next 10 years. That means to us that there’s going to be strong periods of prices for platinum, palladium, and rhodium going forward, and platinum is probably the premier investment metal of that group. Rhodium is extremely esoteric, it’s a very small market, it’s not trading on the exchange, there aren’t really rhodium coins around, there might be some rhodium medallions, but we advise investors not to invest in those. Palladium, there are coins and there are ways to invest in it. Platinum is the most liquid of these markets and when you look at platinum, it’s the one, as I said, that has underperformed price wise over much of the last six years, which means that it has the most capital appreciation potential going forward.
That’s all for this month. I hope you enjoy it and we’ll talk to you in August.