Precious Metals Basket Market Overview Since 2019

Basket Fix Comparison Since January 2019

Precious Metals Basket Since January 2019:

• Rhodium (+258%) and Palladium(+60%) has enjoyed the biggest climb due to their structural deficit serving primarily the auto emission control catalyst materials markets.
• Gold (+40%) and Silver (+25%) have enjoyed a boost more recently in 2020, especially post the March-April 2020 COVID-19 market impact.
• PGM Minor Iridium (+12%) is on the climb in 2020 due solely to industrial demand and South African Mining disruptions.
• Platinum (+5%) has enjoyed a bit of an investors driven boost in demand, but is also suffering from mining disruptions.
• Ruthenium (+2%) has had an up and down ride.

      Let’s quickly look at each one and key ratios and relationships.

Gold

• Minimal March-April 2020 COVID-19 Impact.
• V-shaped recovery was very quick followed by continued climb. 
• Gold has much more upside potential.

Supply Highlights: Gold is a finite resource who’s mined quantities will decline over the next decade.

Demand Highlights: 

• ~44% Investment - keeps climbing in 2020. One short-term risk is that some central banks could liquidate positions to offset COVID-19 driven declining revenues.
• ~40% Jewelry – significant China/India 2020 Jewelry demand drop as gold prices climb.
• ~16% Industrial - including electronics, medical, drug therapy, and many more.

10-year Treasury Yield vs Gold Fix

• This inverse relationship with Gold and 10-year treasury bond rates has always been strong.
• Are negative bond yield rates possible?  Yes, occurring already in a number of countries
• Gold has plenty of further upside based on global monetary policies as a result of COVID-19

Silver:

• Dramatic March-April 2020 COVID-19 Impact. Longer V-shaped recovery and recent climb.
• Silver has more upside.

Supply Highlights: COVID mining disruptions in numerous countries will continue in Q3/4 2020.

Demand Highlights: 

• ~25% Investment – climbing June/July 2020
• ~20% Jewelry
• ~55% Industrial – including Solar PV, electronics, printed electronics, ethylene oxide catalyst, solder materials, automotive.

Gold/Silver Ratio

• Dramatic March-April 2020 COVID-19 Impact as gold climbed.  Now in
• June & July Silver gains finally bringing sanity to this ratio.
• Today Au:Ag is still above of its long term historical normal range of 20 to 85.

Platinum

• Dramatic March-April 2020 COVID-19 Impact.
• L-shaped recovery.

Supply Highlights:  Clearly COVID related impacts in 2020 will limit supply.

Demand Highlights:

• ~25% Jewelry – is down in 2020
• ~25% Investment
• ~50% Industrial including 36% for auto catalyst materials, electronics, electrochemical, petroleum, and medical

Gold/Platinum Ratio

• Dramatic March-April 2020 COVID-19 Impact.
• Gold and platinum headed in different directions around the COVID-19 timeframe.

Palladium

• Dramatic March-April 2020 COVID-19 Impact. 
• L-shaped recovery. Full recovery is very dependent on global auto sales response as Pd projected to remain in supply deficit for a few more years.

Supply Highlights:  Clearly COVID related impacts in 2020 will limit supply.  Recent Nornickel diesel spill impacts on Q3 output are very unclear.

Demand Highlights:

• ~20% Jewelry – is down in 2020
• ~10% Investment
• ~70% Industrial including huge % auto catalyst materials, electronics, electrochemical, petroleum, and medical

Platinum/Palladium Ratio

• Small March-April 2020 COVID-19 Impact.
• Platinum holding near bottom resistance levels while palladium poised to begin climb again.

Rhodium

• Dramatic March-April 2020 COVID-19 Impact. Response post COVID-19 is paced by global auto sales.
• L-shaped recovery.

Supply Highlights:  S. African PGM Western Limb mining declines dramatically hurt future mined supply.

Demand Highlights –

• Automotive Demand is currently weak although with recovery will remain in structural deficit: Emission Control Catalyst /NOx Control – with little sign of design alternatives staged.
• Glass Production:  Pt/Rh alloys used in glass and glass fiber production systems.

Iridium

• Zero March-April 2020 COVID-19 Impact. 
• 2020 climb independent response to supply/demand fundamentals.

Supply Highlights  S. African PGM Western & Eastern Limb mining declines likely to reduce future mined supply.  Near term continued COVID-19 mining disruptions will further impact Iridium supply.

Demand Highlights –
Electronics demand is strong:  Crucibles for LED’s, OLED IrCl Materials, and SAW/BAW Filter demand will explode with 5G expansion.

• Automotive Demand is currently weak: Iridium and Pt/Ir Tipped Spark Plugs
• Electrochemical Demand is going to grow long-term:  Chlor-Alkali Industry, Waste Water Treatment, Hydrogen Electrolysis Catalyst Materials, Marine Ballast Waste Water Management
• Chemical Demand is also growing:  Acetic Acid
• Medical Demand Is Growing:  Radioactive Isotopes for medical imaging.

Ruthenium

• Positive March-April 2020 COVID-19 Impact. 
• 2020 climb due to supply/demand fundamentals.

Supply Highlights  S. African PGM Western Limb mining declines dramatically hurt future mined supply.

Demand Highlights –

• Electronics demand is strong:  Thick Film Resistors, Data Storage HDD’s, MEMS Sensors, and future Non-Volatile memories including SST-MRAM.
• Automotive Demand is currently weak: Ruthenium Spark Plugs and Electrochromic Coatings
• Electrochemical Demand is going to grow long-term:  Chlor-Alkali Industry, Waste Water Treatment, and Hydrogen Electrolysis Catalyst Materials
• Chemical Demand is also growing:  Caprolactam / Nylon 6 Filament, Acetic Acid, Fertilizer/Ammonia Catalyst. 

Precious Metals Basket 2020 Year To Date

• Don’t be deterred by the short-term view of the basket prices. 
• These should largely resume their trajectories as markets recover and mining remains impacted through 2H of 2020.

2020 2nd Half Outlook

• Rhodium and Palladium:   Continued recovery of global auto sales will begin to put more pressure on Rhodium and Palladium, resuming their structural deficit positions.  Recall the S. African mining sector is struggling to maintain 75% of the previous baseline output due to COVID-19 protocols.  Much of the mining sector work in progress has been processed leaving remaining Q3/4 2020 supply wholly depending on the rate of mining.
• Gold:  Continued climb of Gold as weakening of currencies and global monetary policies continue to react to the COVID-19 pandemic.  Further US stimulus is expected, and further reduction in the 10-year treasury rates.
• Silver:  Additional upside to Silver and further investment spurs additional gains.  Silver will benefit from investment perception of growth in the Solar PV segment which accounts for a full 10% of the global supply.  Further impacts to mined supply are continuing.
• Iridium:  Demand has resumed quite nicely, again putting pressure on mined supply from S. African. Expect to see both climb.  SAW and BAW filter demand for 5G as well as new marine ballast waste water treatment demand will help keep pressure on this PGM Minor metal.
• Ruthenium: Industrial demand has resumed quite nicely, again putting pressure on mined supply from S. African. Expect to see both climb.
• Platinum:  Look for a fairly flat remainder in the platinum price through December. Newly announced Green Hydrogen Electrolysis projects and future auto catalyst Pd for Pt design swaps should help support platinum demand beyond 2020.