Precious Metals 2019 A Year in Review

2019 witnessed a dramatic increase in Rhodium, Palladium, and Platinum, with substantial increases in Gold, and Silver. 
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2010-2019 Recap: 

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1. Rhodium is up an astonishing 145% y/y in 2019                                                        

• 2019 witnessed the biggest percent increase Jan-Dec in the past decade.
• 85+% of the demand is from Auto Catalyst and glass production is another primary source of demand.
• Real word test conditions and tightened requirements in the EU and China are driving the projected 15% increase in demand, even with flat global vehicle sales.
• Central element that drives the catalyst NOX suppression to meet the latest emission requirements.

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2. Palladium +53% y/y                                                                                                  

• 80+% demand is Auto Catalyst.  The EU’s move away from diesel light duty vehicles in favor of more gasoline hybrids.  Essentially this shift decreases platinum demand for diesel designs, in favor of palladium rich gasoline catalyst mixtures.  Real world test conditions are forcing higher loadings.

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3. Platinum +25%                                                                                                           

• Platinum has remained in surplus for another year, yet investment has held this precious metal price upward.
• It is remarkable given the supply/demand fundamentals, that despite this running surplus, platinum is enjoyed the biggest percent increase in price over the past decade.

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4. Gold is +19% in 2019                                                                                                    

• In 2019, gold enjoyed the 3rd largest January through December climb in price this decade.
• Geopolitical risks, and global economic slowdown, especially in China with lingering US/China Trade War have hampered commodity markets, increase risks of recession and overall market risk is declining as a result.
• Central bank buying globally remains strong.

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5. Silver +17%                                                                                                               

• Investment and Industrial demands grew in 2019, including Solar PV silver demand, Ethylene Oxide catalyst demand, and overall electronics demand.  Continued electrification in transportation is increasing the overall automotive demands y/y.  5G will help spur incremental electronics demands for silver as well.

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6/7/8.  The PGM Minor Metals:  Iridium, Ruthenium, and Osmium       

• Iridium was up a modest $5/Toz (+0.3%) on the year due to increasing industrial demand.
• Ruthenium and Osmium has moved laterally most of the year, remaining in short term market balance.
• The minor PGM metals are enjoying record industrial demand, but living off of previous years surplus mined materials to connect to supply.

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Precious Metals Market Fundamentals
Precious Metals global supply is dominated by over 1 billion Toz of mined and recycle silver.  This is followed by 150 million Toz of mined and recycled gold.  Finally, the 6 PGM metals account for less than 22 million Toz of mined and recycle precious metals supply.

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Attached 2019 ending values to these supply shows the collective 2019 precious metals market is a $303 billion USD total market.  Of course, Gold financially dwarfs all of the other 5 precious metals in terms of total available market.

Precious Metals Market Highlights
Now let us look at the major precious metals market drivers:  Jewelry, Investment/Bullion, and Industrial Demand.

• Jewelry is 51% of Gold, 21% of Silver, and 30% of Platinum.
• Investment/Bullion is 41% of Gold, 23% of Silver, and 10% of Platinum.
• Industrial applications of precious metals make up the balance of the demand.
• As can be seen from this chart, Palladium and the Minor PGM’s (Rhodium, Iridium, Ruthenium, and Osmium are dominated by Industrial Demand applications.​

Jewelry is forecast to be relatively flat in 2020, and Industrial demands of the PGM’s and Silver is very bankable.  That leaves questions about the Investment Demand intensity of Gold, Silver and Platinum in question as to future performance.

A look at an overview of the Precious Metals basket describes some of the key supply and demand outlook forces

​Emission Control/Auto Catalyst PGM Demand
Palladium, Rhodium, and Platinum demand driven by one industrial application:  Vehicle emission control systems, and catalytic converter PGM catalyst materials.  A pareto of the top industrial applications of precious metals highlights this key Auto Catalyst demand.

Deeper Diver Resources on the Auto Catalyst Market

• Is Rhodium Pulling a Thelma & Louise?
  • https://www.preciousmetalscommoditymanagement.com/blog/is-rhodium-pulling-a-thelma-louise
• The Auto Catalyst Precious Metals Dilemma
  • https://www.preciousmetalscommoditymanagement.com/blog/the-auto-catalyst-precious-metals-dilemma
• Clean energy might be the future, but there is no game plan - how the PGMs stand to break out
  • https://www.kitco.com/commentaries/2019-12-20/Clean-energy-might-be-the-future-but-there-is-no-game-plan-how-the-PGMs-stand-to-break-out.html

 
Looking ahead to 2020 and the next decade:
Can we expect another explosive year in precious metals prices?  What does history teach us?  Let’s review a few charts covering the past decade of price movement.

Gold – The fate of future gold prices hinges on the macro-economic issues.  Should commodity markets enter into a recession, or geopolitical strife including the continuing trade dispute with USA and China continue, then gold is very likely to continue its climb. 
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Plotting the last 10-years of gold fix, indexing each year to lead January fix to year ending December fix.  As can be seen in the charts below, each of the metals past decade historical data would indicate:

Constructing a forecast for 2020

• Jewelry Demand:  The number one demand sector, Jewelry is expected to remain fairly flat in 2020. 
• Investment demand:  Investment is the most difficult to forecast.
• Industrial demand:  Industrial demand for Silver, and the PGM’s remains strong.  China and India dominate this demand sector.   Downsides on the Pd, Rh, Ir, and Ru all appear to be very low risk.
• Rhodium Auto Catalyst Demand:  Astronomical demand for Palladium and Rhodium for auto catalyst is going to continue into 2020.  New emission standards in China an EU coupled with real world test conditions are going to keep the loadings on vehicle emission systems as high or higher than they are today.
• Rhodium in particular is going to continue to be pressed for supply. Alternative designs in the catalytic converter cost 9-10x more than current Rhodium.  Alternative means to achieve the required NOx emission standards are too expensive, keeping the pressure on Rhodium.

Precious Metals Dec 31, 2020 Forecast

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