2023-07-12 09:35:17 ET
Summary
- Palladium has long-term support at $1,000 per ounce, with a mid-range price target of $1,400 to $1,500 per ounce in the next year or two.
- Platinum is at a monthly bottom and its price, priced in gold, is at a 60-year low, making it a good investment for preserving purchasing power.
- The rise of electric mobility presents challenges for palladium and platinum, but increased demand for hybrid vehicles and fuel cell vehicles could boost demand for these metals.
The following True Vine Letter was originally published for Premium subscribers on June 29, 2023. The charts are now about 2 weeks old.
I have 4 long-term palladium and platinum charts that I want to start this Letter with. First, here is a monthly chart of palladium:
This chart reveals that palladium has a ton of long-term support at $1,000 per ounce. A reasonable mid-range price target looking out a year or two is $1,400 to $1,500 per ounce.
Here are the monthly and quarterly charts of platinum, respectively:
Monthly
Quarterly
Here we can see that platinum is pretty much at a monthly bottom and, more importantly, the quarterly price is also at the bottom of a trend line channel that goes all the way back to the Great Depression.
This quarterly platinum chart reveals the steady depreciation of the U.S. Dollar (rising nominal costs) over the last century. This is a trend that is not going away and may even accelerate going forward.
Finally, priced in gold, platinum is essentially at a 60 year low.
For investors looking for a cheap precious metal to preserve purchasing power, platinum is a quiet, unloved gem.
Palladium is primarily used in catalytic converters for internal combustion engine vehicles ((ICE)). The collapse in prices, like the decline in oil prices, reveals economic weakness.
Platinum is benefitting from the substitution of it for higher cost palladium in ICE vehicles.
The rise of electric mobility are headwinds for palladium and platinum, however, increased demand for hybrid vehicles is a positive. Fuel cell vehicles and hydrogen infrastructure is also expected to boost demand for these 2 metals.
The long-term trend at work is a re-convergence in price of the two metals.
Finally, I have recently purchased more shares of Sibanye Stillwater ( SBSW ) as the stock is at long-term bargain levels where history would suggest a long-term reversal is at hand. Here is the monthly chart:
Simply looking at this chart, one might ask, what about the decline to the $2.50 level in 2018? Here it is important to note that this deeper decline was due to the company having a significantly higher net debt load at the time. A miner with a high debt load is always susceptible to a very deep selloff during a cyclical downturn. All the major miners, at least all the Mid-Tier and Major miners that I follow, have cleaned up their balance sheets which is just another reason why we can confidently own them now.
Sibanye is a volatile stock. When I first covered it in March 2022, it was bad timing. Nevertheless, I haven’t sold and the (figurative, investing) war is not over (including the West’s real war against Russia, a significant palladium producer whose production could eventually be disturbed). Sibanye’s move into “green” metals is real and presents an interesting long-term opportunity.
Sibanye is a quintessential example of the type of stock that you want to be a contrarian on when you buy. Now is just that time.
For further details see:
Palladium And Platinum At Long-Term Support Levels