"No warning can save people determined to grow suddently rich" - Lord Overstone

  • 29 mins Four Tips From The World’s Top Investors
  • 1 day The Dark Side Of Trump's Tax Bonanza: $1 Trillion In Debt
  • 2 days How Goldman Made $200M In A Day
  • 2 days Why Trading On Trump's North Korea Misstep Won’t Work
  • 2 days Samsung Loses $539 Million In Battle Against Apple
  • 2 days Is There Upside Potential For Gold Juniors?
  • 2 days World's Top Diamond Jeweler Joins De Beers' Tracking Initiative
  • 2 days Cryptocurrencies Bounce Back But Struggle With Key Resistance Levels
  • 3 days Millennials Are Waiting For A $30T Inheritance That Might Not Come
  • 3 days Is This the Tipping Point for American Credit Card Debt?
  • 3 days Tech Icon Predicts A Big Future For Ethereum
  • 3 days Apple Doubles Down On Data Privacy
  • 3 days Where To Look As The Treasury Bond Bull Run Loses Steam
  • 3 days The Tech Giants Poised For A Breakout
  • 3 days The U.S. Dollar Is Set To Continue Its Rally
  • 3 days Bitcoin Plummets On Price Manipulation Investigation
  • 4 days The Multi-Billion-Dollar Business Of Influence Peddling
  • 4 days Goldman Backed ‘Stablecoin’ Hopes To Curb Crypto Volatility
  • 4 days Consumers Lost $1.6M To Crypto Fraud In Australia
  • 4 days Facebook May Soon Become A Paid Service
The Tech Giants Poised For A Breakout

The Tech Giants Poised For A Breakout

Bullish sentiment seems to have…

How Goldman Made $200M In A Day

How Goldman Made $200M In A Day

The thought of a stock…

Jeb Handwerger

Jeb Handwerger

Jeb earned a Bachelors Degree in Mathematics and a Masters Degree. He learned most of his technical analysis from the school of hard knocks, managing…

More Info

Palladium Showing Great Relative Strength Versus Gold in 2013

Precious metals and oil (DBO) seem to have reversed higher last week on the military coup in Egypt. Bernanke is scheduled to speak and the markets may already be pricing in some dovish statement to alleviate fears of tapering which could cause some short covering and bargain hunting. Prices of platinum (PTM) and palladium (PALL) continue to outperform other metals such as gold (GLD), silver (SLV) and copper (JJC) over the past 9 months. For many months, I have been warning my readers about the growing risks to platinum and palladium supply as labor strikes intensify in South Africa.

PALL:GLD Chart

Palladium is the only metal that is higher over the past year. Palladium is up over 14% over the past year while platinum, copper, gold then silver are still in negative territory. Palladium and platinum are showing great relative strength in this precious metals correction. I forecasted this since the end of October 2012.

Some of the largest platinum and palladium producers in South Africa are suffering from the labor disputes and violence. South Africa accounts for close to three quarters of the world's platinum supply.

I do not believe that long-term solutions will be worked out there between the unions and the mining companies. Some of the miners have settled but it comes with increasing costs to miners who are already barely marginable.

The risks to disruptions in production are just too great for new capital going into South Africa mines. Once production is disrupted and the deep underground mines are closed it is very difficult and costly to restart.

The geopolitical instability from South Africa may have a significant impact on the supply demand equation for Platinum Group Metals. These metals are crucial to reduce noxious emissions from vehicles as they are used in catalytic converter to lower tailpipe emissions.

No suitable economic replacements for PGMs have been found. Vehicle sales are increasing worldwide especially from emerging economies.

Emission standards are being implemented in emerging economies. Demand for PGMs is skyrocketing as we are seeing a rebound in the North American, Japanese and Chinese automobile sector. Supply is extremely tight from South Africa.

Major strategic consumers could be actively searching for safe and secure supplies of platinum and palladium.

Keep a close eye on top platinum/palladium projects in North America. One small junior PGM miner in North America just completed close to a $6 million financing which shows strong support for the caliber of the company's platinum and palladium assets in the Yukon and Ontario.

Investors should look for platinum and palladium projects in safe jurisdictions as the fundamentals are extremely strong with rising demand and declining supply from South Africa, which produces over three quarters of current supply.

This supply demand imbalance should impact the price over the long term. This correction in the mining sector (GDX) is one of the strongest declines in history and is similar to the 2001 thirty-year low in the mining sector. At that time similar to now, major miners (SIL) were shutting down mines and cutting back. Although it looks negative for the short term, these are the sort of moves that are characteristic of a major bottom. Mines take time to build and expand. There are major lag times that create shortfalls should prices move higher.

The mothballing of projects may be setting the stage for the next major super-cycle in commodities as supply is constrained. The pain that we are seeing in the sector now is setting the stage for the next boom and may be an excellent opportunity for top junior miners developing top notch assets.

Although this is a painful correction, many expect this downturn to lead to higher valuations down the road and increased merger and acquisition activity. Investors should focus on high quality assets with strong management teams and shareholder support that is advancing PGM development.

The supply of PGMs comes mostly from unstable mining jurisdictions. High quality projects in safe jurisdictions could become increasingly valuable as there is a need for a safe and secure supply of these critical platinum and palladium metals.

 


Disclosure: Author does not own any of the securities mentioned. Read more at http://goldstocktrades.com/blog

 

Back to homepage

Leave a comment

Leave a comment