Precious Metals Report 2022
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The world seems to be gradually coming apart at the seams. First the pandemic, now - partly as a direct consequence - inflation running completely off the rails, coupled with the real fear of a proper recession and thus the fear of a spectre whose existence only the older generations can remember: Stagflation! As was last the case in the 1970s, a certain supply shock in conjunction with an exuberant spiral in energy prices is playing a major role here today. Higher energy prices cause production costs to rise, which is why production is reduced. If demand does not fall at the same time, prices rise. In a certain inflationary expectation, this leads to a wage-price spiral, which further feeds stagflation. The basics of economics, the way it should not be done. Or how it should not be done - like the central banks worldwide, which pumped far too much money into the markets for far too long, for which there were far too few countervalues.
Added to this is the Russia-Ukraine crisis, which is causing energy and commodity prices in particular to skyrocket. Good advice now seems expensive, but the solution is so close at hand: asset protection through tangible assets. Real estate is usually out of the question, as it has already been running hot for a long time. Once again, gold remains as a store of value that has proven its worth for thousands of years. At the moment, not only much, but almost everything speaks for gold. Central banks around the world have also recognized this and have recently increased their gold stocks again strongly. The breakout above the old highs has not yet taken place, which interested investors should definitely take advantage of.
Similarly with palladium: Here, too, the old high was not overcome, but an investment in physical palladium is only suitable for value preservation to a limited extent. This is because palladium is primarily an industrial metal. It is mostly used in catalytic converters of gasoline vehicles, which is why palladium has been able to develop at a record high in recent years - due to the shift away from diesel engines to gasoline and hybrid engines. Better and better catalytic converters demand more and more palladium, although production has been falling steadily for years. This could be compounded in the coming months and years by the fact that sanctioned Russia has been responsible for just under half of the world's palladium production to date. 39% of the palladium mined worldwide in 2020 came from Russian mines, and the trend is rising, as the (formerly) big competitor South Africa is transporting less and less palladium to the earth's surface. There is a danger here that this large Russian chunk will no longer be accessible to Western countries for the time being. Rising prices are likely to be the consequence.
Platinum is the only one of the three most important precious metals that has not been able to perform excessively well in recent years. The increasing shift away from diesel as the number one combustion engine led to a decline in demand for platinum, which is mainly used in diesel catalytic converters. But the future looks promising. For in the foreseeable future, platinum will increasingly be used in catalysts to accelerate the reaction of hydrogen and oxygen in fuel cells. The main focus here is on the mass use of fuel cells in commercial vehicles, above all in trucks.
For both platinum and palladium, a drastic slump in supply is to be expected in the coming years, as the important South African mines in particular will not be able to maintain their production to the usual extent. Even rising prices are unlikely to contribute to an improvement.