In 2018, the cycles forecast a major move to the upside for the entire precious metals complex, but naturally, some metals will perform better than others.
Case in point, earlier this year I pointed out the big disparity between the performance of palladium vs. platinum prices. Historically, precious platinum had almost always traded at a premium to the more pedestrian palladium, but not anymore.
This year palladium has zoomed 47% higher while platinum is only up 3%, and for good reason. Palladium demand has soared with mined production falling short of demand since 2012! That puts platinum prices near a record discount to palladium.
But in my previous article I also pointed out that its “only a matter of time before the demand balance swings back in favor of platinum...“and I went on to say that platinum is “the most undervalued precious metal right now.“
Although platinum has continued to underperform the other metals in recent months, I stand by my view that platinum offers the best upside potential from here. Here’s why.
When an entire sector swings from out-of-favor – as precious metals have been since the September peak – to being back in favor with investors, its almost always the laggards in the down phase that stand to gain the most in the up phase that follows. The most beaten-down members of the sector often play catch-up.
In other words, to quote a higher authority: “the last shall be first.” And I’m pleased to say that I’m in good company with this analysis …
A colleague who’s work I admire, Matt Badiali, pointed out just last month that every good natural resource investor must be a contrarian at heart, as I am. He goes on to say:
“Historically, you could buy an ounce of palladium with just half an ounce of platinum. You could also buy an ounce of gold with just three-quarters of an ounce of platinum. Today, that’s reversed. It would cost you over an ounce of platinum to buy an ounce of palladium. It would cost you a whopping 1.4 ounces of platinum to buy an ounce of gold.“
Matt concludes, as do I that “All this data points us toward platinum as the metal to own right now.” I couldn’t agree more, and that’s precisely why I’m eyeing new trades right now to capitalize on the supply/demand imbalance that pushed platinum to such undervalued levels.
When the upturn comes in the New Year, platinum is likely to shine brightest as the best performing precious metal. And when the time comes, you need to be positioned accordingly. In the meantime, continue to hold all open positions, but stay tuned for more trade alerts coming very soon.
Mike and Sean