While the focus in the Precious Metals markets has mainly been on gold and recently on Silver and Platinum, there has been very little focus on stealthy Palladium, despite it’s steady rise.
During June and July, gold has been flat, but Palladium has put on 25%.
Despite Palladium production and consumption being 14% higher than Platinum, it is a less traded market.
On this subject, despite the huge shortages of Platinum that has driven the Platinum price higher, the Palladium stocks on the US Futures Exchange is only 8% of the Platinum stock.
CME data shows Platinum stocks at 515,552 ozs, but Palladium only 64,795ozs. Just 2 tonnes, compared to annual consumption of 7,200 tonnes. This level of stock is unusually low.
The Palladium market was heavily reliant on Russian supplies, particularly during the late Soviet and early post-Soviet period of the late 1980s and1990s, when Russian export quotas largely dictated market dynamics.
While “official” trade data may not quite fit the adage of lies, damn lies, and statistics, variations in how different governments define and record such data make cross-comparisons highly unreliable.
In the UK, for example, trade figures are distorted by the large flows of gold moving in and out of LBMA vaults in London.
Given Palladium’s much smaller market size, these inconsistencies become even more apparent.
Around twenty years ago, while I was based in Luxembourg, we regularly shipped large quantities of Palladium to New York on behalf of a client.
At the time, most—but not all—LPPM London/Zurich Good Delivery Palladium bars also qualified as NYMEX Good Delivery.
Our client preferred Russian ingots, and if we specifically asked our Zurich Palladium clearer to allocate Russian bars, they would charge a premium of $1.40 per ounce.
However, if we simply requested any Palladium ingots without specifying origin, there was no allocation fee, and there was still better than an 80 %chance of receiving Russian ingots; Russia being the largest producer, with most of its output sent to Zurich.
A typical allocation request would be for 10 tonnes, of which we would generally receive around 8 tonnes of Russian NYMEX-deliverable ingots and 2 tonnes of other LPPM London/Zurich Good Delivery bars.
The 2 tonnes of non-NYMEX material would be shipped to Hong Kong for Asian and Middle Eastern investors, while the remaining 8 tonnes were sent to New York to a NYMEX vault to await certification—or to be “blessed,” as it was commonly called.
Now, pay attention, because this is where it gets slightly interesting.
When the various jurisdictions published their trade data we recorded the following: Hong Kong imported 2 tonnes from Switzerland; the US imported 8 tonnes from Russia; Switzerland exported 10 tonnes to Luxembourg and Luxembourg did nothing (as usual). Hence analysts struggle to follow the true trail of all these metals.
Meanwhile, in the US, the news that there has been a large import of Russian ingot, pushes the NYMEX Futures price to a sizeable discount, coinciding with the warrants being released to the Exchange.
No change here. Spreads are wide and lease rates climbing higher still.
The huge flow of Platinum to the US; stocks are near an all time high, has caused even larger shortages in other markets.
Expect more of the same for now, only slower, as we head in to the summer holidays.
FoT: Fear of Tariffs
We continue to see the dislocation between the US Futures markets (CME) and the spot/cash markets elsewhere. Many commodities and some metals have been caught up in Tariffs, but so far there has been no mention of precious metals in official circles.
However, this has not stopped large inflows of precious metals to the US and eye watering premiums; just in case there is a sudden Trumpesque surprise.
These premiums are being fuelled by FOMO: Fear of Missing Out (on huge profits).
The banks that control the physical stocks and financing are making profits beyond their wildest dreams and believe me, these guys have some very weird and wild dreams.
Though now we have a new acronym to add to FoT, TACO: Trump AlwaysChickens Out.
Let’s wait and see.
