Tale of Two Metals: One WAY More Valuable Than Gold, The Other Historically Undervalued / Commodities / Platinum

Gold is the metalof kings, the ultimate money, an eternal store of value, an untarnishableembodiment of beauty. Gold is all those things. But it is not the most valuablemetal you can own on a cost-per-ounce basis.

Often, platinum commands a higher price than gold.Lately, platinum has traded at an abnormally large discount to the yellowmetal.

Metals investorswho want to hold the most concentrated wealth in a single ounce bullion productshould opt not for gold or platinum…but for a different platinum group metalcalled rhodium.

Rhodium is scarceand thinly traded. Frankly, it’s a little-known metal even among metalsinvestors.

Like platinum andpalladium, the primary application for rhodium is catalytic converters for carsand trucks. It is alloyed with platinum and palladium to enhance resistance tocorrosion. Rhodium is also used in some types of jewelry.

Rhodium hasquietly been in a raging bull market over the past couple years. Pricesbottomed out in 2016 at around $600/oz. This September, they surged to over$2,400/oz and have remained there.

As impressive asthat quadrupling is, rhodium still trades far below its all-time high from 10years ago. From 2004 to 2008, rhodium launched from $500 to as high as$10,000/oz. At its current value of $2,425/oz, the niche metal still has lotsof room to run.

Of course, thetrade off associated with rhodium’s explosive price potential is that it also carriessignificant downside risk. This metal isn’t for the faint of heart.

Folks justgetting started in precious metals investing should first build up coreholdings in gold and silver. But more seasoned hard assets investors who wantto add a high-risk/high-reward speculative component to their precious metalsportfolio might consider rhodium.

The high-flyingmetal is currently available to investors in the form of one-ounce bullionbars. They come sealed and authenticated by either of the reputable mints Baird& Company or PAMP Suisse.

More options areavailable for the more popular catalytic metals, platinum and palladium. Bars,privately minted rounds, and even some sovereign coins are available toinvestors.

A Contrarian Beton a Platinum Comeback

Platinumcurrently sells at a discount of more than $350 to gold and a discount ofnearly $250 to palladium.

That’s unusualhistorically on both fronts. In fact, the platinum:palladium ratio, which camein at over 5:1 as recently as 2009, slid below 0.8:1 this October – its lowestpoint since 2001!

Platinum’s largediscount incentivizes industrial users of palladium (mainly automakers) tobegin substituting in platinum where feasible. Platinum has generally beenfavored by diesel engine manufacturers, while palladium has increasingly beenpreferred for conventional gasoline vehicles.

Ever since theVolkswagen diesel emissions cheating scandal, diesel car manufacturing has beenin a bear market – bringing down demand for platinum as a side effect. Whetherplatinum prices have finally bottomed out remains to be seen.

Platinum won’tstay down forever, though. Its next bull market could be driven by a comebackfor diesel, substitution by palladium users, a supply shortfall, or somecombination of these fundamentals.

Most platinumcomes from South Africa, a country now ruled by a land-grabbing, asset-seizinggovernment.

Due in part topolitical risk and in part to adverse market conditions, many South Africanmines have scaled down operations or closed this year.

Total annualplatinum supply of 8 million ounces still meets demand, but that dynamic couldchange by next year.

In the monthsahead, supply destruction could lead to a deficit in the platinum market. Giventhe dire situation in the South African mining industry, supply will difficultto ramp up again when it’s needed.

Contrarian metalsinvestors are positioning themselves in platinum at current levels with theexpectation that when the market turns, prices could run higher for years tocome.

At the veryleast, a bet on platinum again becoming more expensive than palladium... andagain more expensive than gold, seems likely to pay off eventually. It alwayshas before whenever platinum got anywhere near as depressed as it is today.

Stefan Gleason isPresident of Money Metals Exchange, the national precious metals company named 2015"Dealer of the Year" in the United States by an independent globalratings group. A graduate of the University of Florida, Gleason is a seasonedbusiness leader, investor, political strategist, and grassroots activist.Gleason has frequently appeared on national television networks such as CNN, FoxNews,and CNBC, and his writings have appeared in hundreds of publications such asthe Wall Street Journal, Detroit News, Washington Times, and National Review.

© 2018 Stefan Gleason - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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