Palladium canary in the coal mine
- Published: Dec 12, 2018, 3 AM
The recognizable top 2018 performer in the precious metals market is palladium, according to at least one market analyst, Craig Hemke of TFMetalsReport.com.
Palladium closed on the London Market Dec. 10 at $1,234 per troy ounce, with platinum at $786 and gold at $1,245.35.
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Palladium, as with platinum, is used in industrial applications, primarily as a catalyst for controlling automobile and truck emissions. The spot price of palladium has more than doubled since 2016, according to market statistics.
On a recent podcast on Moneymetals.com, Hemke reported the price of palladium performed parabolically once before. Between late 1999 and early 2001, the price of palladium swung from under $400 to more than $1,100 before plummeting.
Analyst Clint Siegner reports on SilverSeek.com that because of a continued shortage of available palladium, investors are willing to may a premium of $100 or more per troy ounce to acquire the metal for immediate delivery.
Nearly 40 percent of the current supply of palladium is produced by Russia as was the case when prices last spiked nearly two decades ago. To meet demand in 2001, Russia stepped up production, but Siegner doesn't expect the country to do the same this cycle.
Siegner believes palladium’s performance is a precursor of what could happen to the gold and silver markets.
“For one thing, the lease rates for palladium have gone berserk,” Siegner reports. “Bullion bankers and other short sellers often lease metal to hand over to counterparties standing for delivery on a contract. Until very recently, they could get that metal for less than one percent cost. Last week, that rate spiked to 22 percent.”
Siegner goes on to report that “gold and silver bugs have long expected the bullion bankers will eventually put themselves in this kind of bind with the monetary metals. They have sold contracts representing something on the order of 100 ounces for every ounce of actual gold or silver sitting in exchange vaults.”
“A failure to deliver in the relatively tiny palladium market could be the ‘canary in the coal mine’ — a warning to investors in other precious metals,” says Siegner, a director at Money Metals Exchange.
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