Last week gold had a fairly good week, up 1% overall and trading at $1,574, and silver stayed flat at $18.11. While these numbers are solid, if unspectacular, they pale in comparison to what is going on in other precious metal markets right now.
Three other precious metals – palladium, rhodium, and platinum – have been stealing all the headlines of late. These three metals, primarily used in the tech and auto industries, have experienced huge movement recently because of their physical shortages.
Rhodium is trading at $10,000 an ounce now, where it was at just $6,000 at the beginning of 2020. A few years ago, the price was barely four figures an ounce. Palladium has experienced a similar boom, up more than 5% last week alone, and a whopping 25% since the start of the year.
These precious metals are only produced in great volume in two places, which are contributing to their spike in value. One place is South America where power outages and other unrest is stifling the mining industry. The other is Russia which presents its own issues as a global trading partner.
So, what do these skyrocketing prices mean for the more famous precious metals, gold and silver? It is a good sign that their boom is on its way as well.
And, it is not only obscure precious metal watchers who think this is coming soon. Billionaire hedge fund manager and founder of Bridgewater Associates, Ray Dalio, is a keen believer in these trends as well.
Central banks around the world are currently continuing to rack up mounds of debt and chase negative real interest rates. This means that paper currency WILL go down in value while hard money will not.
This is just one of the factors that led Dalio to tell CNBC at Davos last week that cash is simply not what he wants to be invested in. He actually went so far as to say, “cash is trash” and
Most recently, the stock market has been the best place to be. Even with the volatility, the overall trend has been decidedly upwards for the last few years. Commodities, on the other hand, have not fared as well. This makes sense when costs hold but even though food and energy are staying down, the cost of everything from healthcare to education to housing and more are climbing rapidly.
What is oil and grain started to have a similar production shortage and price explosion like palladium is experiencing? Think about what that would mean for the cost of everyday life. If the palladium price curve is any indication, it would cause massive problems for the world economy in the form of inflation and devalue paper currency at an alarming rate.
How comparable are palladium and other more common commodities really though? Well, when you look at things such as the declining number of oil rigs around the world or the lack of investment in copper mines in recent years a similar situation does not seem all that unrealistic.
It is not just commodity and financial fears either that could cause inflation like this. You do not need to look much further than the worldwide coronavirus scare going on right now to see what an outbreak like this can mean for the world’s economy.
With a contagious disease spreading and no antidote to be found, skittish investors have caused major waves in the stock market. While this may pass quickly, if this virus or another in the future was here to stay, it could devastate paper investments everywhere.
If paper currency was devalued for any reason – and as you can see, there are more than a few possibilities – investors around the world would flock to scoop up all the gold and silver they could get their hands on. Then you would have a rhodium or palladium-style spike in gold and silver and you will be glad you listened to Dalio’s sage advice.