In mid-January of 2020, one of the world’s most valuable precious metals, palladium, surpassed $2,500 an ounce to set an all-time record.
What does this mean for precious metals investors? It’s important to understand the backstory. There has been wide-ranging general commodity price suppression and attempts to control precious metals prices.
The result is that these attempts have been backfiring. Physical shortages cannot be denied and the prices of these precious metals are exploding as a result. When governments, banks, and financial institutions conspire to suppress price points for precious metals, it inevitably leads to market shortages.
And when these shortages occur, physical producers have no choice but to accept higher bids for their products in order to keep the commodity flowing. This is exactly what’s fueling palladium’s record-level price rise.
This also brushes upon a few major points concerning other precious metals as well.
In the 2010s, palladium has outperformed almost every other commodity, especially in the last half of the decade.
This is not the result of some sort of “palladium bubble” that is about to collapse. If you see someone talking or writing about that, don’t give the claim much credit. Chances are that they have an incentive to push that narrative.
There are a few reasons palladium is having an incredible moment right now. But to find them, you’d have to dig beyond mainstream media coverage.
The first reason is that the two main producer nations of palladium are not the best nations when it comes to stability and international trade.
South Africa, with its electrical blackouts, failing infrastructure, precious metal mining strikes, and never-ending political issues is the leading producer. Next, comes Russia. The palladium supply in Russia can and has been cut off entirely in the past. When this happens, palladium prices spike. In the past, prices have jumped to as much as 4x the price of gold.
In addition to the issues that come from the palladium producing countries, there are a couple of other main issues that are leading to the current rise of palladium prices.
The first issue is that since around 2013, there has been a commodity price suppression program in place to artificially keep prices of precious metals low.
This high-volume trading discount program means that foreign central banks or large financial institutions can trade almost any CBOT, NYMEX, and COMEX derivative contracts at a discount while the rest of the investing world is blissfully unaware that a program like this even exists.
This program has been put in place by a company called the CME Group who owns and operates both COMEX and NYMEX where majority gold, silver, platinum and palladium price discovery occurs.
The CME Group has notified the markets that they plan on extending this program that is heavily slanted in favor of specific foreign central bank commodities, precious metals, and derivative trading, through January of 2021.
The other issue here is that experts do not believe that the price signals match the actual supply and demand for palladium. Because there is a physical shortage, the powers that be can no longer contain the price and keep it artificially low.
Right now, the paper value of palladium is finally starting to catch up with the actual supply and demand in the market. This is a trend that is just starting so since there will not be a boom in the supply of palladium coming, the prices will not be able to be stopped from trending upward.
The price ramp now for palladium is inevitable and is important to watch not only for palladium investment but also because the same process is likely to be coming soon to the gold, platinum, and silver markets.
The average investing public probably doesn’t have significant investment positions in palladium. However, the fact that the palladium market should be a precursor to the other precious metal markets makes it worth watching closely.
It also means that now is a very smart time to pick up investment positions in these other precious metals markets while commodity prices are still low.
As we said the same of gold and silver when both were at discount levels, we’re now saying of palladium.