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Palladium price collapse
knovak1976
Posts: 219 ✭✭✭
I have almost all the Palladium American Eagles.............and am starting to think they are quickly becoming nothing more than a severely overpriced coin at this point. The price of an ounce of palladium has literally fallen off the cliff. It was almost $2400 an ounce just a few short months ago and is now hovering around the $1,400 an ounce mark............almost $400 BELOW an ounce of gold. It's been dropping like a rock............and yet there's not a lot of news as to why. Going to be hard for the mint to sell the Palladium Eagles when prices are dropping like they are. Anyone?
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Palladium historically was cheaper than gold. It all depends on when you started looking.
You don't buy Palladium eagles to invest in Palladium.
I stopped watching the Pd market when I sold my holdings a few years ago. (I owned zero Pd coins).
Why did I sell? First of all, the major players are countries like Russia and we know they don't like us and will try to manipulate the market to maximize any of their sales to fund their economy and wars. Second, most of the major users of Pd have long term contracts with set prices which leads to price volatility in the spot market. At the end of the day, the market really isn't a free market and you have to be patient over the long haul with this metal.
What did I invest in instead? I moved my Pd holdings to silver and gold mostly for liquidity and less market manipulation.
Another factor that is impacting the market (and I'll admit that I have not researched this in detail as a former catalyst manufacturer), is the use of Pd in auto catalysts along with Pt and Rh. With the surprising increase in electric vehicles, I'd guess the net result is a lower demand for Pt, Pd, and Rh. Thus, price pressure will be downward.
Just my two cents.
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This is the inflation adjusted price chart for the last 20 years. Hardly a collapse.
This is market manipulation, too- just not directed at palladium.
This ^^^. Markets project the future, as opposed to reflecting the past. Palladium is not what we traditionally think of as a precious metal, unlike even platinum,which has always been used in jewelry, or a form of money, like gold and silver.
If internal combustion engines go the way of the horse drawn carriage over the next generation, what would an ounce of Palladium be worth then? Palladium still has any value at all because it is still needed for catalytic converters. That is projected to change, rapidly, in the near to intermediate future. And that realization is what is hitting the market.
The price will fluctuate day to day, but, long term, there is no law of nature that says it cannot go back to where it was before it began being used in the automotive industry. From the chart @Vasanti posted, that number could be less than $200 per ounce.
Yeah. Every move we don't like is always manipulation. The Hunt brothers were gazillionaires, and they couldn't pull it off over an extended period of time. How come everyone else seems to be able to nowadays? Maybe it's just a market moving in an unanticipated manner.
Remember, at any given price, there is always a buyer and a seller. They both think they are right, but one of them is always going to be wrong.
No, it's the market...not market manipulation. One of the big levers in demand is going bye-bye and that is huge.
The global auto sector uses about 10 million ounces of palladium each year, and that is between 80-90% of TOTAL demand. Industrial, jewelry, and other speculative sources are tiny.
Gold and silver have been impacted by country variations in a single source of demand accounting for 20-30% of volumes (and the net amount is much less since it's 1 or 2 countries). Here, you have a GLOBAL cutback that is over 80% of total demand.
I believe in the next few years gold will be 2x palladium's price. Maybe more.
Interesting, but not that meaningful, IMO. Long-term charts don't take into account the present OR future.
I could show you a long-term chart of the number of Smith-Corona (personal) and IBM Selectric (business) typerwriters in use from 1965-1990 and it would look like that palladium chart. And right about the peak, Microsoft Word came out and we know what that did to typewriter demand.
The word gets overused IMO but I think that EV's are definitely an existential threat to the price of palladium at these levels. I believe it was $125 in 1991 so it cold easily sell for $750 and still be in-line with gold's move since. It was $500 in 2016 and is up almost 3x since then (6x at the peak) which far outstrips gold and silver.
That's the demand side....now worry about supply. You have all those projects that started when palladium was $2,500 - $3,000 an ounce and folks were speculating on $5,000. That supply hits in the next year or so. Then you have all the recycled palladium from used autos. That is NEW supply. Russia could increase production if Putin is ever toppled.
And with autos, remember that production is being cut globally. Automakers need to conserve cash to funnel $$$ into EVs. The U.S. auto industry used to produce 17 MM autos each year -- now it's 13 MM. Similar cutbacks globally.
I don't consider any of my PM stuff -- bars, bullion, or coins/numismatics -- to be "investments" like stocks or bonds but if I was putting discretionary $$$ into a PM then palladium would probably be one of the ones at the bottom of my list.
Disagree. When the vehicles that use catalytic converters are being banned and EVs are being subsidized, that's manipulation.
edited to add... That manipulation is not directed at metal prices, but they are most certainly affected by the manipulation.
I can agree with you that the use of catalytic converters is certainly going to decrease in the long term due to electric vehicles, but that’s not what is hurting the price right now. First, car manufacturing suffered mightily through the pandemic due to supply chain issues. That decreased the need for palladium for catalytic converters. Now, interest rates are rising which will decrease new car purchases. People are betting that palladium consumption will decrease due to interest rate pressures on vehicle sales.
Would demand be dropping quickly in an actual free market?
In terms of supply, Russia and South Africa each produce about 40% of the global production of palladium; the political stability of these two countries does have an effect on pricing.
Unlike gold and silver, the platinum group metals (which include palladium) are primarily valuable because they are both rare and useful, not because of a self-perpetuating belief (as with gold) that "it's valuable because it's valuable". It is demand from that "use" that primarily drives the price.
Palladium has historically had a primary use in automobile catalytic converters; as such, demand for this application should indeed fall in the coming decades as electric vehicles increase and petroleum vehicles decrease.
However, this is not palladium's only usefulness; future technology will likely see demand rise again. For example, palladium absorbs and stores hydrogen better than any other metal. If/when the hydrogen economy takes off, it will be because we've found ways of storing and transporting hydrogen that don't involve large quantities of dangerously flammable gas or expensive-to-preserve cryofluids. Palladium absorption has been postulated as being a potential game-changer; this property of palladium has been known for over a hundred years - check out this medal made from palladium hydride way back in 1869 - so all we need is the tech to make the hydrogen come and go from the palladium quickly and reliably. If this does pan out, prices for palladium will skyrocket.
Note that word: "if". We've been trying for over 150 years to make a palladium-hydrogen power system that's efficient, reliable and economically viable. It might take another 150 years before we get the breakthroughs. Meanwhile, the price of palladium will tank.
Roman emperor Marcus Aurelius, "Meditations"
Apparently I have been awarded one DPOTD.
I recently watched a convincing YT video that convinced me that Pl was going to outperform Pd. I then proceeded to convert most of my Pd holdings to Pl. Platinum is severely under-valued right now. IMO.
No one knows because there has never been a free market as long as there has been a government.
Fascinating discussion!
The catalytic converter thieves have finally stolen enough units to effectively lower the market value of the Palladium coins!
An insane world we live in
With all due respect I do NOT like this graph which hides the late erratic behavior of Pd - please note the semi-log "y" axis that hides the fact that there has been a 50% drop in the price of Pd in one year or less...
I do NOT have an axe to grind but in many ways Pt is a BETTER reducing agent that Pd.
Well, just Love coins, period.
Absolutely agree. Platinum is a better industrial metal to invest in than palladium. However, that 50%drop in palladium prices was caused by a 50% increase in palladium prices related to both Covid market pressures (everyone bought cars like crazy) and the war in Ukraine (Russia is a major supplier). That price spike was temporary and it hid underlying economic pressures that would have flattened palladium’s prices in the last few years.
Well. Here’s the $400 spread. Now back to pontificating 🙀
🎶 shout shout, let it all out 🎶
Never had any interest in Palladium... or Platinum for that matter. I stick with gold and silver - liquidity mainly... but gold will never be worth nothing, and has been viable currency in civilization for most of history. Cheers, RickO
It's government interference in the free market, I agree. But not manipulation of the price of palladium. On that we agree.
If I owned 1 or 2 palladium coins I'm not really going to care. I presume that wouldn't make or break anybody if the price gets cut in half or more from today's levels. But if I had a large stash I'd definitely be selling on strength.
And if someone likes their coins for whatever reason but fears a decline, you can probably short an ETF or buy something else that hedges the price to the downsize. Just be careful and do your DD.
Probably not. But the key here isn't to pontificate about what the government's SHOULD be doing but what they ARE doing.
And what they are doing is putting major speed bumps into future demand for palladium. Meanwhile, alternate uses are very preliminary and speculative.
Would you want to open up a gas station in a large urban area today with Uber, Lyft, and EVs ready to steal market share ? I sure wouldn't.
My guess is going forward you read about hedge funds going long gold and silver and shorting palladium (and maybe even platinum).
The increase in electric vehicles will cause a copper and nickel shortage and clad coins will have their moment when that happens. You would’ve been glad to pay attention to @cladking when that happens.
The more I see things, the more I think nice clad coins are a better place to put money in than platinum, palladium or even gold at this point because of auto demand.
I think that nickel and copper have good demand going forward and I actually would buy a copper stock to play that. But nickel is tougher and BOTH have plenty of supply coming forward in the next few years.
It's tough to pick a long here as things can change. But as a short, palladium is about as easy to pick as I have seen among PMs. Outside of manipulation by Russia/Putin, it has nothing to propel it higher over the long-term.
Unfortunately for me who wants to own some of the Pd eagles, I love the mercury dime design, the coin prices have not been following the falling price of the metal from what I have seen.
It’s probably also important to point out repeatedly that it was government regulation and subsidization that led to the creation of the infrastructure to support the use of petroleum powered vehicles. Not to mention the government’s construction of all of the supporting road infrastructure. The government meddled in the economy to allow for gasoline and diesel powered vehicles and they will meddle on the economy to facilitate their eventual replacement. It’s just what they do.
I am right there with you. I will watch as they move down and try to decide on a price to buy. Issue price has already come down a lot so I would think dealer prices would have to catch up as well. Sub $2000 will make me watch a little closer.
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I'm quite sure that modern coins are not the way to play the metals market. I'm pretty sure that even 1000 oz bars aren't the way to play the base metals.
Dude, copper is $4 per POUND. Nickel is $12 per POUND.
If you have 100,000 pre-1982 cents you have 680 pounds of cents. If copper doubled, your coins would go up $2000 in value... as soon as you can figure out how to scrap your 680 POUNDS.
You want to play the copper or nickel market, either buy mining stocks or buy a futures contract for a few thousand pounds. You're not even going to make lunch money on pocket change.
And even if copper went up a factor of 10, it's not going to push the price of 66 or 67 coins like @cladking is talking about. At $40 per pound, you copper cent has 25 cents worth of metal in it. Do you really think that's going to push the price of collectible clad?
Circa 1990 I was offered 100 oz. of Palladium at $95 per. I passed because no one cared about it at the time- and I figured I would just be tying up cash flow unnecessarily... EVs weren't a thing yet and gas was still just a buck. Oh well...
RIP Mom- 1932-2012
Pd used to be half the price of platinum and cheaper than gold. When there were some Pt disruptions, they started using Pd as well which pushed the price. It's a natural science oddity that 80%(ish) of both metals come from two countries.
Oh well...as you say... you can't buy everything. Where would you keep it?
Platinum is different for me. I always thought that it was underpriced, even before the electronics and auto people discovered it...due to the fact that it's easily 50 times scarcer than gold and, as you mentioned, pretty much only comes from a couple of locations.
RIP Mom- 1932-2012
Cars are never going away. The amount of copper needed to support the infrastructure for electrical vehicles and the “green transition” as a whole might end up doing to copper what was done to silver decades ago. I’m of the belief that coins aren’t great investments, but if you’re going to bet on coins that will gain value, you have to go to where other people aren’t willing to go. We’ve let clad coins go for too long and the rise in price of copper and a possible copper shortage might finally give clad coins their day. Especially since it costs more than a penny or a nickel to make those respective coins. What’s to stop dimes, quarters and dollar coins from being next?
They will eventually.
I suspect dealers are in denial a bit. They're not doing analysis on long-term supply and demand issues, they bought something at a premium and they want to make a profit. Prices are ALYAYS sticky to the downside.
In percentage terms, has the premium gone up as the price of palladium has gone down faster than the coin price ? Eventually, either a continually falling palladium price or a flat price at lower levels will depress demand for the coin and the premium will come down.
Unless people just value the design, aside from the metal itself.
If I can post PDFs here, I have research on copper, copper miners, etc. I'm not sure PDFs are allowed here.
What a great discussion! My hat off to many of you!
None of that prohibited anyone from building EVs or using road infrastructure. EVs were being developed in the 1800s and only went away because they were not competitive with other designs.
Copper, nickel, or cu/ ni are never going to go up much because of their metallic content. At least they never will vis a vis their current face value.
However I do believe that if gold, silver, and even palladium coins were to increase substantially from these levels, coin collectors would put a significant portion of their profits into clads and moderns. Not only do increases in metals prices create a lot of "wealth effect" in the hobby but purchases tend to be concentrated into what is 'hot" and this will certainly include clads.
In 1979 when silver went crazy the profits were put into what was hot then. Most of this was US silver coin and silver dollars but it also included indian cents and buffalo nickels. Even mint set mintages increased substantially despite the mint raising prices.
One thing that is going to be interesting relative to palladium and platinum pricing is the war in Ukraine. If a peaceful solution is reached, I think you can expect Russia to increase production which will decrease prices. I personally think we are in for a long slog, and that’s one of the reasons I think there is a limited downside risk. If I’m wrong about that (which I very well could be), then you might see price pressure increase as auto production increases in a couple of years after interest rates start to go down and demand for automobiles picks back up.
Never is an awfully long time. With the rate of inflation it won't be long before the melt value of the metal exceeds face value. and mining these metals will become more expensive at a rate higher than inflation. I'm sure there are better investments, but I think they will go up more than you suggest.
I'm sure many have thought that for a long time. While it does not seem like much in a single coin, but a copper cent is worth 250% of its face value. That is pretty significant, and if it happened to the cent there's nothing to say it couldn't happen to the other denominations.
Paper money eventually returns to its intrinsic value. Zero. Voltaire. Ebay coinbowlllc
I'll take Wishful Thinking for $100, Alex...
RIP Mom- 1932-2012
Actually, platinum is around thirty times rarer than gold, according to the World Platinum Investment Council. Supply is increasing as currently approximately 190 metric tons of platinum are mined worldwide annually, compared to 3,300 metric tons of gold.
Otherwise, I agree with your thinking. The only reason why I think platinum is not more valuable than gold is that it's a white metal and appearance wise is easily confused with silver. Luxury buyers love flaunting that yellow. From a jewelers standpoint, platinum jewelry is more difficult to create due to it's melting point being about 1000 degrees higher than gold..
It has. Nickels cost 9 cents to produce at one time, not sure if the current number. But so what? Even if a nickel is worth a quarter, they are not a good store of value because of the weight to $ ratio. There's 90 nickels to a pound. Even at 5x face value, that's only $22.50 PER POUND as opposed to silver at $22.50 per OUNCE at current prices and gold at $60 per GRAM.
People purchase what they want and need. Just as you don't put a '16-D dime in a slot for a '72-D dime you don't buy a toaster when you need a can of dog food.
The wealth effect leads people to buy all manner of things but especially they buy things similar to what has gone up a lot generating that wealth effect. If someone sells bags of silver quarters at an obscene profit they are more like to buy more coins than more toasters. And if they buy coins they are more likely to buy what's hot than what's not.
This is all neither here nor there since inflation is driving the prices of precious metals down in the bizzaro world we live in now days. Without a wealth effect it's highly academic what people would be buying.
Palladium supplies will increase -- stockpiles, new mines, recycling of auto parts, etc. -- and demand is going to fall steadily.
That's a lethal combination.
I believe gold will once again sell for 2x the price of palladium, probably by 2025 if not sooner.
$22.50 is pocket change to some and a lot of money to others.
Paper money eventually returns to its intrinsic value. Zero. Voltaire. Ebay coinbowlllc
True, except I'm not sure what that means in this context. People that find $22.50 to be a lot of money are not going to stack hundreds of dollars worth of clad coins. People that can afford to stack assets are going to look for a more weight efficient method.
But, hey, go ahead if you want. Start stacking hundreds of pounds of clad coins. Just remember to reinforce the floor.