In four of the last five U.S. elections, platinum prices have risen by 6%, with the sole exception being Trump’s 2016 victory. This time, a Democratic win would likely trigger a rush for strategic assets as defence industries ramp up stockpiling.
However, a Trump victory could also prompt strategic stockpiling to maintain the momentum of the “America First” agenda. Trump is already electioneering on an anti-EV platform to US car workers. Demand for EV’s has already fallen this year by nearly 70% in the US and EU and will continue to do so as bans on ICE vehicles get repealed or continually pushed further and further away.
The shift in vehicle demand back toward internal combustion engine (ICE) vehicles and hybrids will lead to increased demand for platinum, as hybrids require a higher concentration of the metal. Meanwhile, platinum supply is continuing to decline, deepening the deficit.
Remember, US election day is 5th November. There is still time to buy before the election, but the window is closing quickly.
War! What is it good for?
Appalling as it is, it’s good for the price of precious metals. While Gold has its place as a Reserve Currency, the other precious metals are viewed by Governments as “strategic assets”; something to be hoarded in times of turbulence. Sophisticated electronic weapons contain silver, platinum and palladium and once used, tend not to be recycled.
Modern warfare is complicated, but subject to many “norms” of modern society, such as environmental issues (fighting vehicles with catalytic converters, running on bio-diesel) and health and safety regulations. I get regular updates from a British soldier on the readiness of NATO armies. British troop carriers being refitted with new seatbelts as the old ones were deemed not safe enough. He was in Germany on manoeuvres at dawn, but by 9 AM the Germans tanks had failed to arrive. They had been taken out of service because they were not “safe”. It’s only matter of time before bullets and hand grenades get government health warnings. But I digress…
Volatility
Both war and US Elections bring volatility to the markets. Prices fluctuate rapidly and experience frequent jumps, creating an ideal environment for traders to capitalize on and generate profit.
During the First Gulf War, our Chief Trader decided that despite the bank having trading desks in New York and Hong Kong, the London trading desk should be manned 24 hours a day to take advantage of any incidents outside normal hours. The nights could be exceedingly dull and it was suspected the night trader, was dozing off having been to the pub prior to the night shift. So as not to miss out, a very loud “Scud Alarm” (named after the Scud missiles used by Iraq) was fitted to alert dozing traders to incoming news (and missiles).
Volatility is at an all-time high and is only going to get higher. Now is the time to get involved.
Unintended consequences. China intends to launch Platinum & Palladium futures contracts on the Guangzhou Futures Exchange (GFEX) early next year (no doubt to coincide with Chinese New Year). The official plan is to reduce price volatility in these metals for Chinese manufacturers; but as we’ve seen in other Chinese futures contracts, rife speculation only leads to huge volatility.
Not Desert Storm – The Perfect Storm
While Operation Desert Storm took place in 1990 in what was an otherwise stable political and economic environment; inflation was low and economies growing, Western style democracies had respected leaders. Now, we have the perfect storm approaching – our winter of discontent. We have war in Europe and an ever-escalating war in the Middle East. Inflation is stubbornly not coming under control while growth falters. Governments flip-flopping between measures for growth that are inflationary and anti-inflationary and environmental policies that stifle growth; aided and abetted by Central Banks being reactive and slow rather than proactive. The only strong leaders are in the East. Western democracies are getting more polarised as soft Centrists and the left leaning parties accuse the right leaning parties of being extremists.
Meanwhile, the electorate are getting fed up with the “Establishment” be it left, right, or centre. This electorate is being labelled as “populist” in a derogatory manner, as if being popular was undemocratic. This shows the arrogance of the Establishment using the term popular to mean “ordinary” people, rather than supported by many people; though in truth the Establishment’s problem is just that they are only ordinary people who think they are special and disliking the fact that “populist” parties are supported by many people. The definition of democracy is “most popular with the people”.
This will be further fuelled by whoever wins the US election. Whoever wins, it will be a very close call that will be strongly disputed by both sides, leaving a power vacuum in the world’s leading military power between November 2024 and January 2025.
This is not the end of the storm. It is not even the beginning of the end of the storm. But it is, perhaps, the end of the beginning of the storm.
