When this year started, who would have thought that a pandemic would have impacted our markets so dramatically. What a year. Let’s quickly recap the precious metals markets.
Precious Metals Basket Indexed Prices -BASF/EIB USD $ Since Jan 2, 2020
Silver +47.7% (with wild ride of -30% to +60% in between)
Rhodium +184.6%, or 2.85x climb
Key macro level trends to watch relative to Precious Metals:
Supply of the entire precious metal’s basket. Nobody is projecting dramatic increases in supply of the precious metal’s basket, with the one exception of exception being possibly Palladium. Even with substantially higher prices, Gold and Silver global mined production is near its peak. Greenfield projects are well mapped, and new exploration needed to identify cost effective reserves that can be harvested at a reasonable projected cost.
Palladium over the next decade will enjoy both a growth in mining from Copper, Nickel and Chrome mining where Palladium is a by-product in Russia, North America, and even expanded Zimbabwe and S. African Northern Limb mines. Also, Palladium will see increased recycle returns as older vehicles are recycles and the Palladium loadings, mostly in gasoline vehicles, will be harvested. Increased auto catalyst palladium loadings over time ensure this process. Higher palladium recycle returns are baked into the global vehicle fleet already.
Investment Demand is key to Gold and Silver markets. Do we see commodity markets catch fire and investment into precious metals dwindle substantially? Remotely possible, but Not Very Likely. Instead continued global cash infusions and quantitative easing will likely drive further inflationary forces.
Electronics growth appears inevitable year over year. With it more demand for the entire basket of metals, but especially Silver and Gold. The growth of the average level of electronics per vehicle in automotive is a trend that will continue, as well as trends towards electrifying vehicles (Hybrids, PHEV’s, BEV’s and FCEV’s all demand more electronics on board). 5G communication networks will continue to expand over the next decade, bringing with it more connected, and IoT devices. All of this spells out for more electronics content.
Global Automotive growth seems all but certain. China and Asia demand growth opportunities are the largest growth market globally. Disruption from BEV’s and FCEV’s is going to be far slower than most Green Advocates and governments think. All of the zero emission vehicle mandates in the world won’t change the course of the internal combustion engine. Mineral constraints on Lithium, Cobalt, Nickel, Vanadium, and even Copper are likely to have very tangible market penetration delaying effects on EV market penetration trajectories by 2028. The lack of responsibly mined Nickel is already altering Tesla’s LiB chemistries in both China and EU BEV markets.
Numerous Catalyst Demands should see overall growth. Over 60+% of the PGM’s are used in a catalyst role.
Conclusion: Look for further gains in 2021 in the precious metal’s basket.