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Palladium Charging Higher - Craig Hemke (15/10/2019)

One Ounce Palladium bar in a close-up

October 15, 2019

Regular readers will recall that we've been closely monitoring palladium prices for the past several years. The reason is that a supply-driven collapse of the fractional reserve and digital derivative palladium market might draw attention to the equally-fraudulent gold and silver "markets". The latest extension of this rally in palladium renews our hope.

Over the past year or so, palladium has been the subject of several of these weekly posts. Here are a few of the links for your review:

https://www.sprottmoney.com/Blog/watching-palladiu...

https://www.sprottmoney.com/Blog/the-magic-palladi...

When we refer to palladium being a potential "magic bullet", what do we mean?

In short, the COMEX and LBMA manage the global market for palladium in a manner identical to the global market for gold and silver. Existing stockpiles of physical metal are hypothecated, rehypothecated, leveraged and leased to astronomical extremes. In fact, the palladium "market" is even more stretched than gold and silver. See this below from that "magic bullet" post of last February:

But, as with gold and silver, London is the physical market for palladium, and it is in London where you again will find clear signs of supply stress.

Canadian analyst David Jensen has expertly monitored the LBMA palladium market for months, and as you can see below, he notes that a supply squeeze... as evidenced by sharply rising lease rates ...is once again unfolding there:

And this is reflected in the digital derivative price, which is breaking out from what had appeared to be a double top and making new all-time highs by the day:

 

The potential for a supply-driven squeeze is increasing, too, as the global economy searches for a cheaper alternative to the similar metal of rhodium. And it's VERY important to note that though the industrial uses of palladium and rhodium are similar, their pricing system is not. Where palladium is priced through the LBMA/COMEX scheme described above, rhodium has no futures market and is only priced through the direct trade of metals dealers.

So if demand for physical palladium continues to increase, an increasing amount of stress is placed upon the LBMA/COMEX pricing scheme.

Could there come a point where physical demand overwhelms the digital supply? Yes.

Might the entire digital derivative and fractional reserve palladium market collapse? Yes.

Could this development draw attention to the identical Banker scheme in the gold and silver markets? Yes.

Might this lead to a loss of confidence and a "run on the bullion banks" for physical gold and silver? Yes.

But of course, here's the rub. Maybe no one will care. A collapse of the palladium pricing scheme would no doubt be spun as a simple one-off by the New York and London media. These Bank sycophants would likely go out of their way to assure their listeners that the gold and silver pricing scheme is safe, regardless of the collapse in the palladium market.

However, what if their tactics fail? What if global investors observe the collapse of the palladium pricing scheme and then rightly draw the conclusion that a similar collapse in the schemes for gold and silver is inevitable? What if this leads to a run on the gold and silver bullion banks? And what if this "bank run" leads to a forced reckoning of the hyper-leveraged digital derivative market? The day is coming where the fraud of these markets will be exposed anyway. Perhaps palladium can simply get the ball rolling?

 

To that end, keep a close eye on palladium prices going forward. If, someday soon, price and lease rates go parabolic, the end of The Banks' fraudulent digital derivative and fractional reserve pricing scheme may finally be at hand.

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Head shot of Craig Hemke

About the Author

Our Ask The Expert interviewer Craig Hemke began his career in financial services in 1990 but retired in 2008 to focus on family and entrepreneurial opportunities.

Since 2010, he has been the editor and publisher of the TF Metals Report found at TFMetalsReport.com, an online community for precious metal investors.

*The author is not affiliated with, endorsed or sponsored by Sprott Money Ltd. The views and opinions expressed in this material are those of the author or guest speaker, are subject to change and may not necessarily reflect the opinions of Sprott Money Ltd. Sprott Money does not guarantee the accuracy, completeness, timeliness and reliability of the information or any results from its use.

Comments

Dean
February 15, 2020 at 2:32 PM
What will happen to the price of palladium if there is a +- 1 000 000 oz shortfall of physical palladium in 2020?