Why Palladium is Smoking your Brexit Gold Investment

There have been thousands upon thousands of words written about Brexit, and still, no one really knows what the future will hold. Will the British economy suffer? What happens to the Euro? When will the next domino fall?  All of that uncertainty tends to drive people into so-called safe haven investments. And even though it’s not the best at hedging a portfolio for such shocks, one of the most popular portfolio hedges remains Gold (and to a lesser extent Silver).

But another little known commodity that rarely draws attention is outperforming its metal peers since the Brexit, via Bloomberg.

Metal Markets After Brexit

While it’s hard to believe it’s been a month since Brexit, it surely doesn’t make a track record. But it just so happens the lesser known metals – Platinum and Palladium, have been on an uptrend for a bit longer than that, with Brexit just adding some fuel to their upward trending fire.  While Platinum and Palladium are known to be among the lesser traded commodity markets, leading to some swift moves in either direction from time to time – they look to have found a longer term bottom… now breaking out of their 2015-2016 ranges.

Platinum Daily_1

Palladium Daily(Disclaimer: Past performance is not necessarily indicative of future results)

When we see these types of moves in crude oil or corn, we can better understand the physical change it represents. There’s a lot of Crude Oil drilled out of the ground, prices go down thanks to oversupply.  There’s a drought in the Midwest, Corn goes up because of lack of supply. But what sort of drivers do these metals have?  What are Platinum and Palladium used for anyway?

Platinum is used in catalytic converters, laboratory equipment, electrical contacts and electrodes, platinum resistance thermometers, dentistry equipment, and jewelry.

Here’s a snippet from a good infographic on Platinum.

Infographic on Platinum

And Palladium:

Palladium is used to make springs for watches, surgical instruments, electrical contacts and dental fillings and crowns. 

Some specific stuff there, but both have more use than say, Gold. At least according to one of our favorite Warren Buffet quotes:

“Gold gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head.”

So, car sales must be good to be eating into the Platinum and Palladium supply, but trying to gauge these factors and time when to invest in Palladium and/or Platinum (there’s some ETFs who would happily take your money) is fraught with danger. Look no further than the longer term chart of Platinum, which fell more than 50% since 2012.

Platinum Weekly(Disclaimer: Past performance is not necessarily indicative of future results)

The way to access these markets without having to be in the know of the latest platinum news is to invest in something to access those markets when it needs to but doesn’t have to deal with the day-to-day moves.

And that’s just what managed futures and global macro managers do. They don’t sit there waiting for fundamentals to line up for Platinum. They cover 60-80  markets that are between them constantly moving up, down, or sideways – and enter a market when it shows significant momentum in one direction or the other. One month that could be the Nasdaq, and another it could be Palladium – allowing them to capture the moves in the popular markets and the ones that don’t get headlines to themselves.

So get out there and buy some catalytic converters! All those invested in alternative investment programs covering the Platinum and Palladium markets will thank you – with many managers now long those markets and looking for prices to continue to trend higher.

 

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Disclaimer
The performance data displayed herein is compiled from various sources, including BarclayHedge, and reports directly from the advisors. These performance figures should not be relied on independent of the individual advisor's disclosure document, which has important information regarding the method of calculation used, whether or not the performance includes proprietary results, and other important footnotes on the advisor's track record.

Benchmark index performance is for the constituents of that index only, and does not represent the entire universe of possible investments within that asset class. And further, that there can be limitations and biases to indices such as survivorship, self reporting, and instant history.

Managed futures accounts can subject to substantial charges for management and advisory fees. The numbers within this website include all such fees, but it may be necessary for those accounts that are subject to these charges to make substantial trading profits in the future to avoid depletion or exhaustion of their assets.

Investors interested in investing with a managed futures program (excepting those programs which are offered exclusively to qualified eligible persons as that term is defined by CFTC regulation 4.7) will be required to receive and sign off on a disclosure document in compliance with certain CFT rules The disclosure documents contains a complete description of the principal risk factors and each fee to be charged to your account by the CTA, as well as the composite performance of accounts under the CTA's management over at least the most recent five years. Investor interested in investing in any of the programs on this website are urged to carefully read these disclosure documents, including, but not limited to the performance information, before investing in any such programs.

Those investors who are qualified eligible persons as that term is defined by CFTC regulation 4.7 and interested in investing in a program exempt from having to provide a disclosure document and considered by the regulations to be sophisticated enough to understand the risks and be able to interpret the accuracy and completeness of any performance information on their own.

RCM receives a portion of the commodity brokerage commissions you pay in connection with your futures trading and/or a portion of the interest income (if any) earned on an account's assets. The listed manager may also pay RCM a portion of the fees they receive from accounts introduced to them by RCM.

See the full terms of use and risk disclaimer here.

Disclaimer
The performance data displayed herein is compiled from various sources, including BarclayHedge, and reports directly from the advisors. These performance figures should not be relied on independent of the individual advisor's disclosure document, which has important information regarding the method of calculation used, whether or not the performance includes proprietary results, and other important footnotes on the advisor's track record.

Benchmark index performance is for the constituents of that index only, and does not represent the entire universe of possible investments within that asset class. And further, that there can be limitations and biases to indices such as survivorship, self reporting, and instant history.

Managed futures accounts can subject to substantial charges for management and advisory fees. The numbers within this website include all such fees, but it may be necessary for those accounts that are subject to these charges to make substantial trading profits in the future to avoid depletion or exhaustion of their assets.

Investors interested in investing with a managed futures program (excepting those programs which are offered exclusively to qualified eligible persons as that term is defined by CFTC regulation 4.7) will be required to receive and sign off on a disclosure document in compliance with certain CFT rules The disclosure documents contains a complete description of the principal risk factors and each fee to be charged to your account by the CTA, as well as the composite performance of accounts under the CTA's management over at least the most recent five years. Investor interested in investing in any of the programs on this website are urged to carefully read these disclosure documents, including, but not limited to the performance information, before investing in any such programs.

Those investors who are qualified eligible persons as that term is defined by CFTC regulation 4.7 and interested in investing in a program exempt from having to provide a disclosure document and considered by the regulations to be sophisticated enough to understand the risks and be able to interpret the accuracy and completeness of any performance information on their own.

RCM receives a portion of the commodity brokerage commissions you pay in connection with your futures trading and/or a portion of the interest income (if any) earned on an account's assets. The listed manager may also pay RCM a portion of the fees they receive from accounts introduced to them by RCM.

See the full terms of use and risk disclaimer here.

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