Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
Coinbase vs Binance for Bitcoin, Ethereum Crypto Trading & Investing During Bear Market 2021 - 11th Jun 21
Gold Price $4000 – Insurance, A Hedge, An Investment - 11th Jun 21
What Drives Gold Prices? (Don't Say "the Fed!") - 11th Jun 21
Why You Need to Buy and Hold Gold Now - 11th Jun 21
Big Pharma Is Back! Biotech Skyrockets On Biogen’s New Alzheimer Drug Approval - 11th Jun 21
Top 5 AI Tech Stocks Trend Analysis, Buying Levels, Ratings and Valuations - 10th Jun 21
Gold’s Inflation Utility - 10th Jun 21
The Fuel Of The Future That’s 9 Times More Efficient Than Lithium - 10th Jun 21
Challenges facing the law industry in 2021 - 10th Jun 21
SELL USDT Tether Before Ponzi Scheme Implodes Triggering 90% Bitcoin CRASH in Cryptos Lehman Bros - 9th Jun 21
Stock Market Sentiment Speaks: Prepare For Volatility - 9th Jun 21
Gold Mining Stocks: Which Door Will Investors Choose? - 9th Jun 21
Fed ‘Taper’ Talk Is Back: Will a Tantrum Follow? - 9th Jun 21
Scientists Discover New Renewable Fuel 3 Times More Powerful Than Gasoline - 9th Jun 21
How do I Choose an Online Trading Broker? - 9th Jun 21
Fed’s Tools are Broken - 8th Jun 21
Stock Market Approaching an Intermediate peak! - 8th Jun 21
Could This Household Chemical Become The Superfuel Of The Future? - 8th Jun 21
The Return of Inflation. Can Gold Withstand the Dark Side? - 7th Jun 21
Why "Trouble is Brewing" for the U.S. Housing Market - 7th Jun 21
Stock Market Volatility Crash Course (VIX vs VVIX) – Learn How to Profit From Volatility - 7th Jun 21
Computer Vision Is Like Investing in the Internet in the ‘90s - 7th Jun 21
MAPLINS - Sheffield Down Memory Lane, Before the Shop Closed its Doors for the Last Time - 7th Jun 21
Wire Brush vs Block Paving Driveway Weeds - How Much Work, Nest Way to Kill Weeds? - 7th Jun 21
When Markets Get Scared and Reverse - 7th Jun 21
Is A New Superfuel About To Take Over Energy Markets? - 7th Jun 21
Why Tether USDT, Stable Scam Coins Could COLLAPSE the Crypto Markets - Black Swan 2021 - 6th Jun 21
Stock Market: 4 Tips for Investing in Gold - 6th Jun 21
Apple (AAPL) Summer Correction Stock Trend Analysis - 5th Jun 21
Stock Market Sentiment Speaks: I 'Believe' We Rally Into A June Swoon - 5th Jun 21
Stock Market Russell 2000 After Reaching A Trend Channel High Flags Out - 5th Jun 21
Money Is Cheap, Own Gold - 5th Jun 21
Bitcoin and Ravencoin Cryptos CRASH Bear Market Buying Levels Price Targets - 4th Jun 21
Scan Computers - How to Test New Systems CPU, GPU and Hard Drive Stability With Free Software - 4th Jun 21
Hedge Funds Getting Bullish on Gold - 4th Jun 21
THERE ARE NO SOLUTIONS When the Media is the VIRUS - 4th Jun 21
Investors Who Blindly Trust the ‘Experts’ Will Get Left Behind - 4th Jun 21
US Stock Market Indexes Consolidate Into Flagging Pattern – Watch For Aggressive Trending Soon - 4th Jun 21
Microsoft (MSFT) Stock Trend Analysis - 3rd Jun 21
No More Market Bloodbath – Beyond Cryptos - 3rd Jun 21
Bank run, or run from the banks? - 3rd Jun 21
This Chart Shows When Gold Stocks Will Explode - 3rd Jun 21
The Meaning Behind Gold’s Triple Top - 2nd Jun 21
Stock Market Breakout Or Breakdown – What Does The Next Big Trend Look Like? - 2nd Jun 21
Biden’s Alternate Inflation Universe - 2nd Jun 21
What You Should Know Before Buying Car Insurance - 2nd Jun 21
Amazon (AMZN) Stock Summer Prime Day Discount Sale - 1st Jun 21
Gold Investor's Survival Guide - 1st Jun 21
Silver and Copper to Benefit from Global Electrification Push - 1st Jun 21
Will Gold Shine Under Bidenomics? - 1st Jun 21
Stock Market Buy the Dip, Again?! - 1st Jun 21
Stock Market Consolidation Ahead - 1st Jun 21
Stock Market Summer Correction Review, Crypto CRASH, Bitcoin Bear Market Initial Targets - 31st May 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Silver Investors See Palladium as the “Canary in the Coal Mine”

Commodities / Gold and Silver 2018 Dec 11, 2018 - 07:52 AM GMT

By: MoneyMetals

Commodities

The precious metals sector has just one standout performer this year, and that is palladium. Lately the market for that metal has gotten more than just hot. Developments there could have implications for the LBMA and the rickety fractional reserve system of inventory underpinning all of the physical precious metals markets.


Craig Hemke of the TF Metals Report was Money Metals’ podcast guest this past Friday. He has been watching the developments in palladium closely and gave an excellent summary of what's involved.

Palladium prices went parabolic once before. The price went from under $400 per ounce to $1,100/oz from late 1999 to early 2001. Then, just as quickly, the price crashed back below $400.

Palladium's move higher in recent months is reminiscent. It remains to be seen whether or not a price collapse will follow. Some of the underlying drivers are the same, some are not.

Russia May Not Save the Palladium Marketing This Time

Today, as in 2001, Russia is the world’s largest producer of the metal. Mines there contribute about 40% of the world supply.

The shortage 17 years ago was driven by demand. Automobile and truck manufacturers began using more of the metal in catalytic converters. It was a lower cost alternative to platinum.

When the market ran into shortage, Russians, under President Boris Yeltsin, rode to the rescue. They were willing and able to bring more physical metal to market.

The added supply turned the market around just in the nick of time. The LBMA and bullion banks got away with selling way more paper palladium than they could actually deliver.

Today, palladium inventory is once again in short supply. This time around, however, the paper sellers in London and in the COMEX may find themselves at the mercy of Vladimir Putin.

Russian relations aren't what they were in 2001. Palladium users may not get the same rescue as before, assuming Russian miners have stockpiles to deliver.

The bullion banks’ problem is starting to look serious.

For one thing, the lease rates for palladium have gone berserk. Bullion bankers and other short sellers often lease metal to hand over to counterparties standing for delivery on a contract. Until very recently, they could get that metal for less than one percent cost. Last week, that rate spiked to 22%.

That is extraordinarily expensive, and it reflects the scarcity of physical palladium. The only reason a banker might pay such a rate is because he is over the barrel and has zero options outside of defaulting on his obligation.

Severe Shortages Lead to High Lease Rates, Backwardation

In conjunction with the surge in lease rates, the palladium market has moved into backwardation. It costs significantly more to buy metal on contracts offering delivery in the near future than it does to buy contracts with a longer maturation.

Normally the opposite is true when it comes to the precious metals. Investors buying a contract normally pay a premium to have the certainty of a fixed price today for metal to be delivered sometime well down the road.

Investors are paying big premiums (about $100/oz currently) to get contacts with offering metal for delivery now. The near-term price reflects a concern over whether promises to deliver palladium months from now can even be met.

Is the Palladium Situation a Dress Rehearsal for Gold & Silver?

Gold and silver bugs have long expected the bullion bankers will eventually put themselves in this kind of bind with the monetary metals. They have sold contracts representing something on the order of 100 ounces for every ounce of actual gold or silver sitting in exchange vaults.

That much leverage is bound to end in catastrophe, someday. All it will take is a collapse in confidence – the suspicion that paper will not and cannot be convertible for actual metal.

A failure to deliver in the relatively tiny palladium market could be the “canary in the coal mine” – a warning to investors in other precious metals. If there is a failure to deliver in LBMA palladium, it could shake confidence in the much larger markets for gold and silver.

The developing shortage in the silver market suggests that silver could be the next situation, followed by gold.

By Clint Siegner

MoneyMetals.com

Clint Siegner is a Director at Money Metals Exchange, perhaps the nation's fastest-growing dealer of low-premium precious metals coins, rounds, and bars. Siegner, a graduate of Linfield College in Oregon, puts his experience in business management along with his passion for personal liberty, limited government, and honest money into the development of Money Metals' brand and reach. This includes writing extensively on the bullion markets and their intersection with policy and world affairs.

© 2018 Clint Siegner - 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.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in