A look at precious metals 7 months into the year reveals much of the same as we have seen since 2017:
1. Rhodium continues on a tear, up 49% year to date. Rhodium continues to operate in a structural deficit. Over 80% of rhodium demand remains automotive catalyst for emission control systems. Rhodium is the essential ingredient for NOx suppression and meeting those ever tightening global emission standards. Unfortunately the supply of Rhodium will be curtailed over the next 15 years as scheduled end-of-life approaches for some of the worlds oldest and deepest PGM mining operations in South African located on both the PGM Minor Metal rich Western and Eastern sections of the Bushveld complex. Minimal above grounds stocks and investment populations places this critical metal in a very lean physical position going into the next decade.
2. Gold is up 14% on the year. All of these gains came in June and July. Simply put, as the general commodity markets slow, more conventional investments into gold and silver have occurred. Central Bank buying in particular has increased, buying the gold price. Look for additional gains on Gold through the second half of 2019.
3. Palladium is also continuing its 3-year climb up 10% year to date. Although last week saw a significant 13% decline in the palladium fix, there is no reason to expect this critical metal to loose its overall upward momentum. 80+% of the global palladium supply also supports auto catalyst emission control systems. Palladium loadings are preferred on gasoline based engines and hybrids. A structural deficit will also remain in place on palladium for another few years until big auto OEM's successful swing the gasoline based three-way auto catalyst design ratio's more in favor of Platinum, reducing the demand on palladium. These design swaps have been accomplished in the past. OEM's are complaining that today's catalyst designs, and new RDE (Real World) Test Conditions are putting more strain on the overall catalyst designs making design swaps more complex than ever. Coupled with a rapid deterioration by big auto OEM's Internal Combustion Engine's (ICE) Engineering base, as personnel are being shifted towards BEV's, PHEV's and Hybrid power-train design responsibilities. Just as the technical difficulties are reaching their peak, staffing is at its lowest in years. On the palladium supply side, both Russia and North American Nickel and Chrome mining operations are increasing their throughput generating more low cost Palladium and Platinum in the process to help offset S. African mining declines.
4. Platinum is also up 10% on the year. The platinum fix has been on a roller coaster in 2019. ETF physical buys have stood out a key to propping up this metal, which remains in a surplus. No significant increases in physical industrial demands has occurred. The surge in investment activity has driving this metal, riding the coattails of gold. If you want to invest in platinum, have a 2-year plus view. Industrial demand gains wont come likely until the Auto Catalyst demand is increased though design swaps to manage the limited palladium supply. Decade plus long views in platinum are reasonable given the expected significant PEM Fuel Cell Demand growth that is emerging in the transportation and hydrogen generation sectors.
5. Silver is up 4% on the year. Previously down 7% YTD through late May, all of these gains have come since. Silver clearly is benefiting from the rise in Gold and increased investment. Solar PV demand is decreasing modestly due to design thrifting and a flat overall global Solar PV market demand.
6/7. Iridium and Osmium are flat YTD.
8. Ruthenium is down 1% year to date. Although this Minor PGM Metal is in a structural deficit relative to mined supply, processing of previous years surplus concentrate is making this metal flush in physical supply, allowing for modest decreases in the fix. Keep an eye on the different JM, BASF, Heraeus and other Ruthenium fixes, there is some divergence depending on physical surplus.
A summary of the precious metals fixes can be seen in the table below.