Palladium Is An Unsung Green Superhero

October 12, 2019

Smog from vehicle emissions is estimated to cause a third of the air pollution in the United States. The US used to be the world’s biggest contributor of carbon dioxide and other greenhouse gases, but in 2008 China took the ignoble top spot. Despite greater environmental awareness and transit use, vehicles continue to emit a toxic cloud of four air pollutants, caused by the burning of gasoline in the internal combustion engine.



There is a secret weapon for fighting tailpipe emissions - catalytic converters, which in 1975 became mandatory for automakers to put into all new cars and trucks. Also known as autocatalysts, these devices reduce noxious emissions, and have been an important reason for internal combustion engines (ICE) polluting up to 90% less than they did in the 1970s, along with the tightening of nation-wide tailpipe emission regulations, led by California. 



Gasoline-powered ICE’s use palladium in their autocatalysts. Palladium has been a supply deficit for almost a decade and it’s price has been heading north because of tightening tailpipe emissions. No slowdown in demand is expected – the supply deficit is expected to keep  increasing. Unfortunately there are limited investment opportunities for getting into a PGE play with a heavy exposure to palladium. Palladium One (TSX-V:PDM) has the rocks that few copper-nickel-platinum group elements (Cu-Ni-PGE) deposits can boast. 



Leading Indicators Point to Higher Gold



On Friday, October 12, both the US dollar and gold were down sharply, continuing a trend that started on Thursday after President Trump said he would meet with China’s top trade negotiator, Vice Premier Lui He, at the Oval Office on Friday. Around 10:30 am PST, prior to the Trump-Lui He meeting, Bloomberg tweeted that a partial trade had been reached. The agreement reportedly has China making agricultural concessions and the US promising some tariff relief. It could “lay the groundwork for a broader deal that Presidents Donald Trump and Xi Jinping could sign later this year,” the news service said.

 

But something smells bad about this deal and leading indicators look set to roll over.

 

Gold investors love nothing more than a war, economic crisis or any type of geopolitical instability to watch the value of their bullion grow. Heightened global tensions such as terrorist attacks, border skirmishes or civil unrest scare investors into putting their funds into safe havens like gold and stable sovereign debt like US Treasuries. Take your pick from the aforementioned scenarios. 

 

The real kicker for gold though is negative real interest rates which, notwithstanding a major global economic reset that gets growth moving again, are likely to be with us for a long time. 

 

At AOTH, it’s our opinion that US interest rates and those at other G20 countries will keep falling. They need to keep rates low to boost lending and hike insipid economic growth. Trump’s obsession with having a low dollar to increase exports and repair the mountainous trade deficit fits with this narrative. 

 

Also consider that rising levels of US debt are a major deterrent in raising interest rates; the Fed has lowered rates by a total of 0.5% at its last two meetings - a low-rate environment is likely to continue for the foreseeable future, considering the economic uncertainty both globally and domestically. US manufacturing weakness and worse-than-reported unemployment are just two examples of the latter. 



Nevada is the Golden State



Major gold companies are running out of reserves and every year it costs more to mine. That is causing an “existential crisis” for the gold mining industry, as executives at gold producers like Barrick, Newmont Goldcorp, Randgold, AngloGold Ashanti, Newcrest and Kinross, puzzle over how to replace their depleted reserves, where new gold will come from, and how they will deal with the rising costs of extraction. 

 

At the PDAC conference in Toronto this year, Mark Ferguson, head of mining studies at S&P Global Intelligence, shared data suggesting the industry is indeed running out of gold ore to mine. 

 

“Clearly the industry did very well in the 1990s and even through 2008. But since then there’s been a dearth of new big deposits (discovered), and … there is going to be a shortfall in new gold discoveries,” Ferguson told conference-goers in March. 

 

Between 1835 and 2016, Nevada produced a phenomenal 158 million ounces. This is more than any other gold rush, including California’s, which extracted about $2 billion in precious metals from 1849-62, and the Comstock era, 1860 to 1875, which mined around 34 Moz, according to research by The Nevada Sun. Nevada currently produces around 80% of all the gold in the United States. 

 

Impressive as these numbers are, junior gold investors sometimes overlook Nevada, thinking that all the precious metal has been found - not so. While the western state certainly has been well-explored and mined, there is still huge exploration potential remaining for multi-million-ounce discoveries, especially around the edges and in the depths of existing or past-producing gold mines and trends. 

 

At AOTH, we believe that Nevada is tough to beat. Some gold investors steer clear of the state, thinking it has been mined out, but the reality is altogether different. This analysis of gold companies operating in Nevada shows there is a lot going on.

 

Richard (Rick) Mills

aheadoftheherd.com

Ahead of the Herd Twitter

 

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Richard owns shares of Palladium One Mining Inc and PDM is an advertiser on Richards site aheadoftheherd.com.

Richard owns shares of NV Gold and NVX is an advertiser on Richards site aheadoftheherd.com

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Most silver is produced as a byproduct of copper, gold, lead and zinc refining.