Platinum and Palladium… Plenty of Room for Growth in 2017

If you read Tuesday’s newsletter, you know that gold and silver still have significant growth potential for the remainder of 2017. With that said, today we’ll be discussing the outlook for platinum and palladium. In the first two weeks of July, the precious metals market took a major hit; however, all four precious metals have quickly begun to recover and make attempts to regain their losses. Like gold, palladium has experienced enormous growth after slumping in December 2016. On the other hand, platinum and silver are performing significantly less than in the summer and fall of 2016, but are still among the top performers this year.

These numbers reflect year to date (YTD) performance as of July 20, 2017.

Where Will Platinum Head Next?
On Tuesday, July 11, platinum hit 7-month lows, dropping to as low as $891 per ounce. Mitsubishi Corporation International argues that, combined with lows in December and May, this drop creates a triple bottom, a pattern that occurs when prices reach three consecutive lows and is often associated with upside break outs.

Dr. Steve Sjuggerud, Editor of True Wealth, explains what this short dip in platinum prices could mean for the white metal: “In the last 10 years, platinum has fallen into the $800s just twice. And it didn’t stay down there long… In late 2008, it fell into the $800s. Platinum then doubled in less than 18 months. In January 2016, it bottomed around $820 an ounce. By August—just seven months later—it rose to around $1,175 an ounce, for a 43% move.”

Sjuggerud suggests that, because platinum is currently cheaper compared to gold, it could see an even larger uptrend than 2008 and 2016. In 2008 and 2016, the gap between platinum and gold was much smaller than it is now, and in 2008, even when the price drop occurred, platinum was actually priced higher than gold.

For the past few years, the gold-platinum ratio has been at a historic low. Because platinum is highly undervalued compared to the price of gold, it is a great investment. Platinum prices currently sit around $930 per ounce, whereas gold prices are hovering around $1,250 per ounce. Historically, it has always been more valuable than any other precious metal, but ever since the financial crisis of 2008, the gap between platinum and gold has closed, with gold prices often surpassing platinum prices in the past six years.

In March 2008, for example, gold prices averaged $968.43 per ounce, whereas platinum prices reached an all-time high of $2,253 per ounce. Almost ten years later, we are seeing a reversal in this trend. As a result, the gold-platinum ratio has significantly increased. In March 2008, the gold-platinum ratio was 0.46, whereas now the ratio is at an all-time high at 1.35. This trend cannot be sustained.

Despite platinum’s rise to around $930 per ounce, investors have maintained a bearish position on platinum futures exchanges lately. In the past year, platinum prices have taken a major hit, down from as high as $1,176 per ounce last August. The white metal made its way back up into the $1,000s in February, but was back down below $1,000 per ounce by March. Compared to its strength last year, platinum’s gains of roughly 3% this year are paltry.

Platinum’s long-term trajectory also received a major shock recently with the announcement that Volvo Cars will only be selling hybrid and pure electric cars after 2019. Although on the surface, this sounds bad for platinum group metals (PGM), it is important to note that Volvo’s hybrid automobiles will still use an engine after 2019, and will thus still partially rely on PGM catalysts. Moreover, compared to other carmakers, Volvo has a comparatively small output, so the demand for PGM will still exist.

Palladium—2017’s Best-Performing Precious Metal
As the second best-performing commodity and the best-performing precious metal, palladium has gained roughly 26% this year, making gold, platinum, and silver’s gains of around 8%, 3%, and 2%, respectively, seem minimal. Reaching a 16-year high on speculative demand during the first half of 2017, palladium, which is commonly used in catalytic converters, is on a tear.

Palladium’s surge is largely a result of rumors that Europe will be switching from diesel-burning to gas-burning cars in an attempt to reduce emissions. This is in spite of Volvo’s announcement that it will be phasing out internal combustion engines as soon as 2040. According to experts, the outlook for platinum and palladium, both commonly used in the catalytic converters of automobiles, is still strong.

Because of its position as one of the world’s rarest elements and the fact that the majority of the world’s platinum is mined in Russia and South Africa, palladium prices are often subject to speculative trading. In fact, this year palladium prices are the closest they’ve been to platinum prices in roughly 20 years!

Despite dropping to four-week lows of $829 per ounce the first week of July, palladium is now close to $870 per ounce. The dip in prices in early July was due primarily to rising real yield environment; however, prices quickly rebounded as a result of increased speculative buying interest in the OTC market. The OTC, or over-the-counter, market is different from a typical exchange market, in that trading is completed directly between two parties, much like trading foreign currencies.

Strong palladium market performance can also be attributed to growth in the Chinese car market, which increases demand for palladium for use in gasoline emissions. Industrial demand and speculative demand have proved to be largely responsible for palladium’s incredible performance this year. In June, palladium prices hit a 16-year high of $928 per ounce!

Own Two of the World’s Rarest Precious Metals
As two of the rarest precious metals on the market, platinum and palladium are incredibly valuable investments to add to your portfolio. We now have your choice of platinum or palladium 1-ounce PAMP Suisse Fortuna bars available exclusively to you at some of the lowest premiums available.

Platinum

• 1-ounce platinum PAMP Suisse Fortuna bar—Spot + $80 per bar*

Palladium

• 1-ounce palladium PAMP Suisse Fortuna bar—Spot + $40 per bar*

Due to their rarity and limited mintage, both platinum and palladium are currently highly undervalued compared to gold. For more information about how you can add these valuable industrial metals to your portfolio, call us at 800-831-0007 or email us.

To read Tuesday's analysis on gold and silver, click here.

*Prices subject to change based on market fluctuation and product availability. Prices reflected are for cash, check, or bank wire. Offer expires Friday, August 4, 2017.