The Gold/Silver Ratio (GSR), which reflects the amount of silver it takes to purchase one ounce of...
What's Going on with Platinum and Palladium?
Gold and silver have been in a holding pattern for some time now, trading within a relatively narrow range, despite the recent short-lived boost from safe haven investors looking for some reassurance while geopolitical instability is shaking the Middle East.
But what about the other white metals? Platinum and palladium make up a smaller portion of the precious metals investing space, but offer diversity in a portfolio just the same.
In the last bull market, gold and silver’s upward momentum gave palladium and platinum a boost as well. The precious metals markets are impossible to time, and investors should continue to put faith into gold, or even consider diversifying into all four major precious metals. Since the four major precious metals markets are driven by unique supply and demand factors, diversification can allow you to minimize volatility and maximize returns.
Falling Star Palladium
Palladium, a member of the platinum group of metal, is 30 times rarer than gold, but sold at a substantially lower price per ounce for most of its history. Over the past few years, a sustained supply deficit coupled with robust demand and rising interest from speculators pushed prices of palladium to new highs. At the peak, palladium touched above $3,000 an ounce in the spring of 2022. Unfortunately, palladium has gradually come back down to 2018 levels over the past year.
There are only two countries in the world primarily responsible for the vast majority of palladium production and mining, Russia and South Africa. With the Russian invasion of Ukraine, one would have expected the supply to be limited and possibly even inaccessible at times going forward, driving prices up. However, the stock market’s turbulence swept palladium up in the larger sell-off in the commodities space.
As a result, palladium has plummeted 38% so far this year. Palladium has dropped 11% in October after rising 3% last month and sliding 5.3% in August. Because it is such a thinly traded market, palladium spot prices are prone to volatile swings to the upside and the downside.
Auto production growth may be marginally positive for palladium demand going forward, but it’s unlikely that we’ll see palladium return to 2022’s highs any time soon. Palladium currently sits around $1,140 an ounce.
Platinum Ready, Steady, Poised
The name platinum come from the Spanish word platina, which means “little silver.” The name was acquired after the metal was brought back to Europe from South America in the 1750’s. These days, platinum is sometimes nicknamed “big silver” for its use across many industries, due not only to its lovely silver shine, but the fact that it is as resistant to corrosion as gold.
For most of its history, platinum traded at a higher premium to gold. In recent years, it was eclipsed by its sister metal palladium and dropped far below gold’s pricing, despite being 10 times rarer than gold. Analysts predict an eventual return to a dominant status in the future due to platinum’s high value in industrial usage; its rarity and limited supply should lead to price increases going forward.
Yet, platinum is trading at less than its historic average value. Today, gold is trading for around $1,970. So, if platinum traded in line with its historic premium over gold, then platinum should be trading for well above $2,500 an ounce.
Instead, platinum is down 15% in 2023. Platinum has remained basically even this month, dropping just 0.5% in October after declining 6.6% last month and advancing 1.7% in August.
The long-term platinum outlook is a little stronger based on supply constraints and rising demand from growth in industrial sectors, as it is a key element in the emerging green economy. Taking into consideration new demand drivers combined with shrinking supply surplus, platinum may soon have a place to shine in every bullion portfolio. Platinum currently sits around $890 an ounce.
Diversification is the Way to Go
Whether spot prices for platinum and palladium are set to fall further from here, or rise over the long-term, the biggest benefit of owning precious metals is still their ability to mitigate risk in your portfolio. Now is the right time to set up your desired portfolio allocations in tangible assets, while precious metal prices are still at current levels.
To learn more about the best ways to invest in gold, silver, platinum, and palladium, please call us at 800-831-0007 or email us today.