Major optimism for platinum, silver, and copper

Attention in the metals markets shifted this week from silver to copper and platinum. While big moves in silver and gold prices may be coming down the road, the monetary metals are currently taking a back seat to electrical and automotive metals.

A massive push by the Biden administration to replace gasoline vehicles with electric vehicles is helping to crank up demand for copper. Anything involving electricity involves copper – and lots of it.

Electric vehicles and their massive batteries contain an average of 180 pounds of the metal.  That’s six times the copper that’s used in gasoline cars. Even larger quantities of copper are required for EV charging stations and necessary upgrades to electrical grid infrastructure.

Electric vehicles sales are expected to grow from 4% of the market to 10% by 2022. And if the “Zero Emission” lobby gets its way, EVs will be 100% of the car market by 2030 with a federal prohibition on gasoline vehicles.

Regardless of concerns about personal freedoms being trampled in the process, it may simply not be feasible to power tens of millions of new electric cars without enormous upgrades to electricity generating capacity.

That will require enormous quantities of industrial materials, including copper. And the red metal isn’t likely to come any cheaper in the years ahead.

In particular, platinum is on the move. Concerns over a mining supply deficit and the prospect of renewed demand from automakers and jewelers are helping to send platinum prices more than 13% higher this week.

As long as platinum continues to trade at a discount to gold, it will look relatively attractive to investors and jewelry buyers.

And as long as platinum continues to be available at a much cheaper price than palladium and rhodium, it will be sought by automakers who are looking to lower their catalytic converter costs through substitution. 

Gasoline cars are still the vast majority sold, with growth in the developing world projected to remain strong. But if electric vehicles do become market dominant over the next decade, that could deal a blow to the demand profile for platinum and palladium absent an increase in their use in battery or fuel cell technologies.

Silver, however, is expected to see major increases in demand from electric vehicle production and solar power generation. Silver is essential in a variety of electronic applications, including cell phones, due to its superior conductive properties.

Silver along with its more prestigious cousin gold may increasingly come to be seen as essential for wealth protection amid rising inflation risk. 

With $1.9 trillion in new federal spending coming down the pike, more stimulus checks, and a possible minimum wage hike, price levels in the economy seem bound to rise. If all that isn’t enough, then Federal Reserve officials will keep pumping fresh liquidity into the financial system until consumer price inflation takes off to their satisfaction.

Fed Chairman Jerome Powell gave remarks to the New York Economic Club on Wednesday. He acknowledged U.S. government finances weren’t on “a fiscally sustainable path.” But he insisted federal budgetary issues play no role in the central bank’s policy decisions.

And despite his frequent claims of not wanting to take sides in political debates over fiscal policy, Powell suggested Congress shouldn’t even try to rein in the deficit at this time given high rates of unemployment.

In this environment where deficits don’t matter and monetary policy is ultra-loose, investment demand for precious metals is likely to remain strong. Although the pace of public bullion buying isn’t as furious as it was several days ago, market conditions remain tight. 

Although Money Metals is still fairly well supplied, other U.S. dealers are mostly sold out of privately minted silver bars and rounds – the favorites of value-focused silver investors.

The supply situation in silver coins is similar, with some availability but higher premiums on certain items, particularly Silver Eagles which have become scarce as a result of the U.S. Mint failing miserably to keep up with the retail demand.

Gold, platinum, palladium, and copper products have faced less intense buying pressure. Availability and premiums there are generally not as stressed at this time, although they are still up a bit from their pre-Covid levels. 

Conditions can change without warning or notice. So can spot prices. Those who are waiting for the “perfect” time to buy would be well-advised to take at least a partial position beforehand – in case the perfect time never arrives.