As most of our readers are aware, our friends at Sprott Asset Management recently launched physical platinum and palladium bullion trusts out of expectations that the metals will see substantial gains over the next decade over major supply issues.
With both platinum & palladium soaring over the past few weeks, Sprott has released a MUST READ summary of the platinum and palladium markets (Sprott compares both metals to the uranium market in 2003), and why they believe the physical metal will outperform the mining companies.
Despite being long-time precious metals enthusiasts and active investors in gold and silver, we did not focus on “the other precious metals”, platinum or palladium, until very recently. Our interest in the space was ignited by a client’s request to assess investment opportunities in the debt and equity of Platinum Group Metal (PGM) mining companies – an exercise that came up almost completely dry. As long-time resource equity investors, we are familiar with the mining industry’s supply/demand cyclicality and the impact it has on commodity prices. Looking more closely at the PGM miners, the platinum and palladium industry reminds us of the uranium industry back in 2003. Like uranium, platinum and palladium are crucial to a number of important industrial applications where demand for them is relatively inelastic to price. And like uranium in 2003, palladium is also marked by an opaque, but rapidly diminishing foreign supply stockpile, which had previously balanced out the market and effectively capped the price.