You May Have Overlooked These “Sleeper” Precious Metals

Precious metals markets got off to a rocky start this week as Wall Street celebrated promising developments on the vaccine front.

On Monday, stocks surged while gold and silver sold off hard. That selling didn’t bring downside follow through, however. The metals held trading range support levels and pared some of their earlier losses heading into this Friday the 13^th.

A metal we don’t often talk about traded up to an amazing record high earlier this week. The noble metal rhodium made palladium look dirt cheap by comparison – commanding as much as $15,000 per ounce.

Like platinum and palladium, the primary application for rhodium is catalytic converters for cars and trucks. It is often alloyed with platinum and palladium to enhance resistance to corrosion. Rhodium is also used in some types of jewelry.

The high-flying metal is available to investors through Money Metals Exchange in very limited quantities in the form of one-ounce and 5-ounce bullion bars. They come sealed and authenticated by either of the reputable mints Baird & Company or PAMP Suisse.

That said, we don’t necessarily recommend buying rhodium at these levels. It’s certainly not suitable for all investors. Those that own rhodium and want to take profits.

We would suggest that those looking to diversify their metals portfolio beyond core gold and silver holdings consider platinum bullion coins or bars instead. The market for platinum is more liquid and the price per ounce is much more affordable.

Platinum is more than twenty times rarer than gold. It is so rare that all of the platinum ever mined could fit into a room measuring 25 feet by 25 feet.

The case against platinum is that its demand profile is very narrow, dominated by the automotive industry, and is generally not held in monetary reserves like gold.

In large part due to a big diesel-emissions scandal a few years ago, platinum has been out of favor for use in auto catalysts as manufacturers have turned more to its sister metal palladium. But with palladium now costing more than double what platinum does, incentives for substitution are strong.

There are also incentives for investors to substitute or supplement with platinum as part of their hard asset mix. Inflows into the top platinum exchange-traded fund have surged this year along with the broader wave of gold and silver buying.

It won’t take much of an increase in demand for platinum to overwhelm mining supply. The platinum producing industry, such as it is, will struggle to arrest declining output levels.

As a hard asset, platinum should benefit from the inflationary environment the world now faces. Meanwhile, if there’s an economic recovery, platinum prices would receive a new tailwind from rising industrial activity.

On a historic basis, platinum is extremely undervalued versus gold, palladium, and most definitely rhodium.

A few years ago, though, an investor could have purchased rhodium at a fraction of today’s price. As recently as early 2017, rhodium sold for less than $1,000 per ounce.

Rhodium’s explosive move since could potentially play out on a similar scale in other metals in the years ahead. Perhaps platinum, perhaps silver, could enjoy a massive multi-fold run up on supply scarcity and surging demand.

The CEO of First Majestic, one of the world’s leading silver producers and a past guest here on our podcast, expects to see much much higher silver prices. First Majestic founder Keith Neumeyer said in a recent interview that silver will become increasingly essential to alternative energy components of the “green economy” that politicians around the world are racing to transition us into.

Keith Neumeyer: I still believe today that silver is going to go to triple digits, and I get laughed at all the time, but I'm not going to get knocked off my game just because some people think I'm talking my own book. I actually believe for real fundamental reasons.

If we're going to go green and we're going to do everything we need to do as a human race to evolve this species to where we want to go, we need a lot more silver, and copper as well, but obviously, I run a silver company. So, I'm going to keep pushing as hard as I can growing this business, stay very much focused on silver. In one of these days, I will be vindicated when I see triple digits.

Triple digit silver may not be that far off. Considering how rapidly five-digit rhodium came to fruition, silver could see a $100 handle on a relatively modest bull market advance.

Well, as the presidential election continues to be contested and all eyes focus on Georgia to determine the balance of power in the U.S. Senate, the Republican-controlled Senate quietly moved this week to change the makeup of the Federal Reserve Board.

Senate Majority Leader Mitch McConnell finally cleared the way for a vote on President Donald Trump’s nominee Judy Shelton.

Her nomination is bitterly opposed by Democrats who have derided her past support of a gold standard. Some Republicans have wavered on supporting her because of her unconventional views on monetary policy. But it appears that she now has the votes to be confirmed sometime next week.

We doubt Shelton will move the central bank toward sound money principles. But she could serve as a powerful voice of dissent on monetary policy decisions.

The Fed operates based on the myth that its monetary activism is supported by all the leading experts.

It’s true that the economists who work for banks, for Wall Street, and for the government tend to endorse the Fed’s inflationist philosophy. But there are entire schools of economics dedicated to opposing it.

There is also thousands of years of history demonstrating that inflationary fiat monetary systems ultimately fail.

Currency based on hard money – gold and silver – may be inconvenient for the agendas of powerful financial and political interests. But precious metals will always represent real value which can never be replicated by paper notes or computer digits.

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