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PLATINUM AND PALLADIUM FOR IRAs AND INVESTMENTS

By: Christine von Liederbach
August 9, 2018
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PLATINUM

Platinum is the chemical element Pt, atomic number 78 and is one of the rarer elements in earth’s crust. It is a member of the platinum group of elements (PGEs) in the periodic table. This group is comprised of six noble precious metal elements including ruthenium, rhodium, palladium, osmium, iridium, and platinum. These precious metals tend to occur together in the same mineral deposits.

Platinum appears silver-white and is a dense, malleable, ductile, and very unreactive precious metal. As a noble metal, platinum is resistant to corrosion and oxidation in moist air. Its name is derived from the Spanish term platina meaning “ little silver.”

Platinum is rare and is found mostly in South Africa, which accounts for 80% of the world production. Only a few hundred tonnes are produced annually, and platinum is regarded as a highly valuable and a major precious metal commodity.

Also, platinum is one of the least reactive metals. It has a extraordinary resistance to corrosion even at high temperatures and therefore is considered a noble metal.

As the beautiful precious metal occurred naturally in riverbeds with sand, clay, gravel and silt, native people in South America used platinum in their art and handiwork even in pre Columbian times.

Currently, Platinum is used in catalytic converts electrical contacts and electrodes, dentistry and jewelry.

Approximately three-quarters of the world’s mine output of Platinum comes from the South African mine supply.

PALLADIUM

Palladium is a chemical element and a lustrous slivery –white metal with the symbol Pd, atomic number 46. And like Platinum, it is also a rare and noble precious metal and a member of the platinum group of elements (PGEs).

Palladium is named after the asteroid Palls which was in turn named after a title for the Greek goddess Athena, who acquired the nickname when she accidentally killed Pallas, the daughter of the river-god Triton during one of the girls frequent practice sessions of the arts of war.

Although Palladium is a member of the platinum group of elements and has similar chemical properties to the other metals, palladium has the lowest melting point and is the least dense of them.

Ore deposits of palladium and other PGMs are rare. The most extensive deposits have been found in South Africa, Montana, Canada, and Russia.

More than half of the mined supply of palladium and platinum is used in catalytic converters, which convert as much as 90% of the harmful gases in automobile exhaust into less toxic substances. Palladium is also used in electronics, dentistry, medicine, hydrogen purification, groundwater treatment, and jewelry.

Because of Palladium’s limited supply and many applications there is also strong investment interest in this precious metal.

In fact, recently one of the world’s leading precious metal consultancies, Metals Focus, stated in a report that Palladium is forecasted to post a supply deficit of 1.24 million ounces, while platinum, seen as a more balanced market, is forecasted to post a surplus of approximately 40,000 ounces.

Last year palladium outperformed platinum in September for the first time since 2001 and has been in place fairly consistently ever since.

CHANGING MARKET CONDITIONS

In two of the world’s largest automotive markets, China and the United States, gasoline powered cars historically use palladium – the normally less expensive metal, while in the European market, the more popular diesel powered vehicles used platinum.

Metals Focus sees the conditions changing in 2018. “Platinum must contend with the ongoing decline in the diesel’s market share within Europe, which is proving more rapid than had been expected,” Metals focus said. “Consensus expectations see this slide continuing with any material offset from tightening heavy-duty emissions legislation in China unlikely to come before 2020. The above market share losses will be exacerbated by a shift to selective catalytic reduction (SCR) solutions.”

Metals Focus forecasts a 3% loss for automotive platinum demand in 2018 to 3.3 million ounces. However demand for platinum from the Chinese jewelry market, the largest in the world for the metal, is not decreasing. So this is offsetting further gains in the markets of India and the United States. Therefore, the consultancy forecast for platinum jewelry demand remains unchanged for 2018 at 2.3 million ounces.

The WPIC (World Platinum Investment Council) quarterly report says, “Ultimately, we believe platinum supply remains constrained. Producers are contending with reducing their costs to offset increased labor costs driven up by more than inflation. Moreover, utilities and consumables coupled with the low platinum price continue to put severe pressure on margins and capital expenditure.”

While mine supply is seen falling 0.9% to 6.1 million ounces, Metal Focus said this will not be enough to bring about a material change in the global supply demand balance.

“Overall, the platinum market will be effectively balanced in 2018 with a forecast surplus of just 40k oz” the consultancy said.

Such a “material and ongoing stock depletion” is necessary for the platinum price to move meaningful higher. However, due to platinum’s correlation with gold, analysts see a rise of 3% year–on-year to a 2018 average of $980 an ounce.

FORCES AFFECTING PLATINUM IN THE MARKET PLACE

·      ONGOING DECLINE IN THE DIESEL’S MARKET SHARE WITHING EUROPE
·      HEAVY DUTY EMMISSIONS LEGISLATION IN CHINA UNLIKELY BEFORE 2020
·      CHINESE PLATINUM JEWELRY DEMAND – THE LARGEST IN THE WORLD IS ROBUST
·      PLATINUM’S CORRELATION WITH GOLD

 

The idea of higher palladium prices is more obvious because of higher demand for the metal from the automotive industry. Metals Focus says the forecast is for palladium to rise by 2% to 8.5 million oz in 2018. The consultancy believes speculators will favor palladium, and forecasts prices will rise by 19% year-on-year to an average of $1030 in 2018.

“Key to this outcome will be the impact of tighter emissions standards on PGM loadings in most jurisdictions,” says Metals Focus. “This will be augmented by rising vehicle production…In addition, European palladium automotive demand will benefit from further market-share gains by gasoline in the light-vehicle sector, at the expense of diesel.”

Currently, Metals Focus sees a 2% decline in mine production to 6.7 million ounces this year.

“Overall, the consultancy therefore expects palladium to post a significant deficit in 2018 of 1.24 M oz.” Metals Focus said. “This will herald a further marked fall in above-ground stock of palladium, with these having already recorded sharp declines so far this decade.”

 FORCES AFFECTING PALLADIUM IN THE MARKET PLACE

·      TIGHTER EMISSIONS STANDARDS
·      RISING VEHICLE PRODUCTION
·      DECLINING MINE PRODUCTION

 

If you are considering adding precious metals to your portfolio, call today for your complimentary 20 minute consultation:

The Gold IRA Company ~ 855-554-4853

 

 


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Although the information in this commentary has been obtained from sources believed to be reliable, The Gold IRA Company does not guarantee its accuracy and such information may be incomplete or condensed. The opinions expressed are subject to change without notice. The Gold IRA Company will not be liable for any errors or omissions in this information nor for the availability of this information. All content provided on this blog is for informational purposes only and should not be used to make buy or sell decisions for any type of precious metals.
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