Sprott: Platinum & Palladium’s Breakout Year

platinumAs 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.

 

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By: Rick Rule, David Franklin, David Baker and Shree Kargutkar

Hard assets are gaining momentum once again as market participants digest the potential impact of central bank printing initiatives. After last year’s record level of central bank intervention, 2013 is gearing up to be an even more prolific year on the money-printing front.1 Japanese Prime Minister Shinzo Abe recently unveiled Japan’s tenth Quantitative Easing program to follow the country’s current $224 billion stimulus announced on January 11th. The US Federal Reserve is steadily printing US$85 billion a month under its QE3 & QE4 programs, and reports indicate that the European Central Bank is close to launching its much-awaited Open Market Transaction (OMT) program to purchase European sovereign debt. It’s a money-printing party and everyone’s invited. Even the new Bank of England head, Mark Carney, has hinted of plans to launch more monetary stimulus.2

Professional investors have noticed and are expressing concern over the consequences of concerted currency devaluation and the continuation of zero-percent interest rates. PIMCO’s Bill Gross, aka “The Bond King”, is now regularly touting gold and hard assets as a prudent investment in 2013.3 While his advice appears to have fallen on deaf ears, interest in inflation protection is once again on the rise. We continue to believe that precious metals remain the place to be invested in this environment and are always interested in different avenues with which to participate in the sector’s inevitable rise.

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. Investors will remember that uranium proceeded to perform extremely well from 2003 onwards based on the fundamental supply/demand imbalances that ensued. Our assessment of the PGM industry has led us to believe that platinum and palladium have the potential to do the same. The one difference being, however, that whereas in uranium, where we chose to build our exposure primarily through uranium mining equities, platinum and palladium exposure appears to be best gained through the metals themselves… hence the launch of the Sprott Physical Platinum & Palladium Trust this past December (NYSE Arca: SPPP, TSX: PPT.U).

Read more from Sprott Physical Bullion Trusts
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Comments

  1. Well, what are we supposed to do now. Eric is on Platinum and Paladium. Guess we  need to sell our Silver and jump on that bandwagon huh?

  2. Let’s hope their silver mojo works out at some point soon.

  3. Well maybe Eric is trying to take the heat off Silver and Gold. Wait a minute, isn’t Platinum and Palladium PM’S?

    • Yes, they are.  
       
      Another thing… why do some folks call silver “the white metal” when palladium and platinum are about the same color? Aren’t they “white” too?  Don’t have any Pt or Pd to compare to silver but the pics of them on-line sure look similar to silver.
       

  4. Shhhhh….as soon as TPTB see there is some coin to be made by manipulating these metals, the platinum and palladium ETFs will soon follow.

  5. Anyone having second thoughts about their silver should go ahead and sell it.  It migrates from hand to hand, it is a natural process.
    From weaker hand to stronger hand, that is how we eventually win.  So go ahead. Platinum was looking good to me the whole time it has been lower than gold.  Trouble is, it’s a rich man’s game. 
    Anyway, weak hands or those with doubts, sell out and relax!  Trade the silver pile for a platinum stack, we won’t tell.  

    • “Platinum was looking good to me the whole time it has been lower than gold.  Trouble is, it’s a rich man’s game. ”
       
      It can be.  Pt slipped under $1400 an oz. at one point last year.  The PPLT ETF was selling for around $137 a share, so it was possible to buy some shares even if one was not rich.  Anyone who did is either sitting on some nice gains now or has cashed them in.  I’m holding the gains… for now.  :-D
       

  6. These guys are such jerkoffs and I dont trust them at all.
    theyve bled their garbage on silver for so long people have moved on so now theyre finding another way to fleece people- platinum and palladium.

  7. I have respect for Mr Sprott due to his success by promoting the 100% physical backing of his funds and etfs, I might even misplace some nationalistic pride that he is a fellow canadian, BUT I don’t forget for one second (neither should you) He’s also just some guy that makes ALOT of money for himself and his company by “providing” these vehicles, with the appropropriate premium, for us to invest in. OF COURSE he is bullish, he has a fresh dog in the fight,
     
    Keep stacking

  8. I would also point out that, nowhere in this article does Mr sprott indicate that he is any less bullish on silver, despite his bullish opinions about the PG of metals.
    Beyond the obvious effort to convince other people to jump into his new game, I would be interested to know how much of his own money is invested in his new PG trust.

    • Just remember that these gurus have businesses that count on us to purchase these metals. I am for one in for the long hall. However, I will stick with what I can afford and keep stacking physical. 

    • “ I would be interested to know how much of his own money is invested in his new PG trust.”
       
      I dunno.  Maybe after that first billion, money ceases to seem all that important?  I am pretty sure that he has some skin in the game but only he and his accountant or tax attorney know how much.
       
       

  9. I think we need to stick to the factuals that are reality. The U S dollar is being propped up by the Fed, Europe is in deeper Caca than financial networks are reporting. The American economy is failing moreover at the hands of our corrupt government, we all know that chaos is on the way in the streets of Amereica and most of the world as countries continue to debase their currencies which will end in hyperinflation, higher unemployment, financial ruinment with the stock market, bond market and derivatives market (which includes both aforementioned) start the domino fall of just everything except Gold and Silver and other demand commodities. Why get so infested with the price of Platinum and Paladium when both metals are on strike in Africa? Both are precious metals but not construed as money. When the strikes end and full production falls back into place as long as the tending African governments remain stable, both Platinum and Paladium will fall like a stone in price as Gold and Silver has in the last two years, but as Gold and Silver are accepted as money worldwide, it will become the new monetary standard and China will rule the fucking world with the Gold backed Yuan. How soon will this happen, hour and day? Nobody knows, but it will happen overnight and sooner than the gurus think as well.
    It may be awhile, but hang on tightly to yourSilver and Gold!

  10. Neither of these have a history of being used as money so pass. Industrial demand could crash if the economy tanks.

  11. Sprott is seeing the handwriting on the wall.  He’s like us in that he knows stacking is where it’s at. 
    If China, India, Russia and a half a dozen other countries are starting to  pile on, buying with tons of gold and millions of ounces of silver in their vaults, he was way  ahead of the game,starting several years ago. He knows how to make money on that system with his ETFs but nowhere is he unrelenting in finding opportunities.  It’s pretty clear he’s sniffed out something crucial about Platinum and palladium.  As an ally he’s is first rate and beats almost anyone in this business with the exception of a few other highly informed experts. 

    • Agreed, AG.  Sprott is a very sharp guy and can sniff out business opportunities quite handily.  I enjoy reading his articles and listening to his interviews.  That said, it is a PITA for US citizens to invest in Canada.  Been there, done that, and won’t be doing it again.  Now, if he were to launch a US subsidiary for his ETF products, he would definitely have my attention.
       

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