Palladium Price Premium in Shanghai

Jim H
By Jim H on Fri, Jul 11, 2014 - 10:00pm

Interesting article pointing out a fairly ridiculous (16%) premium for physical Palladium in Shanghai vs. Comex price;

This interview with Jay Taylor discusses price premia of $130 per oz. of palladium and $80 per oz. of platinum in Shanghai vs. the London/NY markets.

We also discuss how the paper metals markets can fail as real metal markets like Shanghai develop.

Given PGM price premia (PGM inventories aren't held by central banks) that we are seeing in Shanghai, as this moves to silver and gold as well, ultimately sellers of precious metals are going to migrate from London & NY to exchanges that deal in real metal and provide the maximum price. It appears that influence of paper markets is waning and there is a transition to real physical markets taking place.

A palladium mining company will have a hard time explaining to shareholders why they are selling through or using LPPM / NY Comex benchmark pricing when they can, for instance, obtain $130/oz more in Shanghai for palladium.

We also touch on the fact that the discussion re. a new Gold Daily Fixing price is a straw horse discussion as it is not the fixing mechanism in London that is broken. Instead, witness the fact that noted that in the summer of 2013, there was 280 million oz. of gold traded on the LBMA per day which is 850x the daily global gold mine production rate. It is not the fix that is broken. It is that London and NY are digital instrument markets that trade pretend gold, silver, etc. to manipulate global gold, silver, platinum, and palladium prices.

Just for reference, so far this year about 40M ounces of Gold have been mined WW.  For Pt and Pd, about 3.3M ounces of each has been mined, and there is no large existing stock of either one.  These are rare and useful metals, subject to the same factors (increasing costs of extraction due to energy cost increase and ore grade decrease) as Gold and Silver.   More and more, I think some of each belongs in a diversified real asset portfolio.  Note also that you can get exposure to these in a Sprott trust (SPPP)

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Jim H's picture
Jim H
Status: Diamond Member (Offline)
Joined: Jun 8 2009
Posts: 2379
Investing in Platinum and Palladium

Referencing the mined quantities above.... another way to think about Pt and Pd as investments is this;

Given the yearly WW mine output of Pd and Pt, there would not be enough metal available for each of the 8M + NYC residents to buy even a one ounce coin of each on a yearly basis.  Not even close.  These are rare metals... and they are real and useful assets.  There is less likelihood of them being in the cross hairs of various wealth confiscation schemes vs. Gold and Silver.  I would think that Pd maples, with their $50 designation, should travel pretty well across borders even where monetary instruments need to be inventoried.  

Note:  I have none of these in safely-stored physical form myself right now - just a small position in SPPP .. I am simply being transparent in my own thought process as I mull over some further diversification ahead.           

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