Looking to Invest in Precious Metals? Matt Badiali Breaks Down the Metal Market
The fascinating world of finance lured Matt Badiali away from the study of his intended field of science. With a bachelor’s degree in the rigorous discipline from Penn State University and a Master of Science in geology from Florida’s Atlantic University, he was on his way toward earning a Ph. D. at the University of North Carolina when a friend recommended another path.
Anyone who has received his advice benefited from the influence of his friend who held a Ph.D. in finance. Many have realized returns of double-digit gains and even triple-digit in some cases. The friend’s intention of persuading Badiali to use his knowledge of science to create advice for the average investor achieved the goal of providing access to excellent financial information.
Providing Insights for Investors
With the launch of his Real Wealth Strategist newsletter with Banyan Hill Publishing in 2017, Matt Badiali reaches readers who know the value of his recommendations in the natural resources market. From his experience and his research, Badiali expects a change in energy consumption that shifts focus from fossil fuels to an electricity-centered world that waits only for battery technology to provide the capacity to “store enough power to supply a city.”
His approach to research and investment prospects lead him to go anywhere to talk to scientists as well as CEOs about mines, oil wells and geologic data. He travels the world to develop the advice for his newsletter, and his research in Haiti, Hong Kong, Iraq, Papua New Guinea, Singapore, Switzerland, Turkey, the Yukon and the Mexican desert reveals the extensiveness of his preparation to advise investors with his expertise in mining, energy and agricultural industries.
Examining the Dampening Effect of the Trade War
With a frank assessment of the market’s view of metals lately, Matt Badiali concludes that the current market hates metals. The news reports of the trade war with China seem to announce another hit on metals each day, and almost everyone knows that the trade war can slow China’s growth. He refers to the vast country as “the mouth of the world” that takes in raw ores, smelts them, builds products and ships them to the United States.
However, Matt Badiali believes that the fundamentals remain strong for platinum even though the price continues to fall. The petroleum industry needs it, but the metal remains very cheap on the current market. He anticipates a bounce, perhaps as soon as the fears of a trade war fade and let the fundamentals produce a viable market again. Demand continues to exceed supply, and the situation may worsen before he expects improvement. The price for platinum may “rocket” when it eventually starts to rise.
Setting Records for Low Prices
The United States Gold Bureau gives investors some reasons for optimism in the potential for the price of platinum to stage a significant comeback.
- In the span of only 10 years, its price exceeded $2,300 per ounce, a stellar achievement that more than doubled the price of gold. Even more astonishingly, it was four times more expensive than its silvery white lookalike palladium. In the current market, gold and palladium have a higher price than platinum. Gold has outpaced the price of platinum only two times in the past 30 years.
- The cost of producing platinum exceeds its value, and experts predict that miners cannot sustain the loss of $200 per ounce. A selling price of $900 and the mining cost of $1,100 creates an imbalance that experts expect to produce a supply deficit.
- Surging demand in China and India for platinum in the automotive, petroleum, glass, electronics and medical industries has created a deficit in the supply line.
- An anomaly that confounds investors regards the price of platinum at a lower price than gold. While 2,800 tons of gold reach the market every year, platinum provides only 250 tons annually. The rarity of platinum that makes it 10 times scarcer than gold presents a vexing imbalance that concerns investors.
- The higher boiling point for platinum and a higher melting point that exceed that of palladium make it a more appealing metal for industrial purposes. Denser as well, the metal’s versatility provides the basis for driving demand.
- After a crash that lowered the price of platinum to $793 per ounce, investors may choose to “rebalance their bets” and create an “upward momentum” that may reverse a trend. The price made it the lowest ever in comparison with gold.
Considering the Influence of Global Conditions
The value of platinum that has applications in jewelry and in the production of diesel fuel ironically has fallen to a 14-year low. Matt Badiali points to the oddity of a price that is lower than it was during the financial crisis while the current supply is down. For the first quarter of 2018, the demand for platinum exceeded the availability by 125,000 ounces, and South Africa’s mines struggled to keep up. Production levels reached their lowest point in two years. Just as the World Platinum Investment Council predicted the rise in demand to come from global economic growth in China, the trade war put a damper on expectations.
Reviewing Some Analyses
Investing News expects platinum production to increase by 1 percent while global demand continues to fall by 7 percent year after year. The surplus of 250,000 ounces challenges the market to return to equilibrium even though analysts expect a reduction to only 25,000 ounces. However, in the face of changing conditions and expectations, analysts look for the market to balance in 2018 as the supply and demand pick up the pace. They attribute the reduced need for platinum in 2017 to the automotive industry that required 3 percent less than expected due to falling demand in Western Europe. The market experienced growth in commercial vehicles for China and the rest of the world as well. As a compounding factor, the jewelry sector did not offer the same appeal for platinum as it has previously demonstrated.
In 2017, the demand globally slipped by 2 percent as the decline in China challenged other regions to offset the difference. A decrease in Japanese bar buying affected the statistics as well. Even with reductions in many sectors, the exchange-traded fund investments came back strongly after two down years. Investors in the United States increased their holdings by 90,000 ounces.
Earning an Unwanted Appellation
Seeking Alpha wonders if platinum may have a good year in 2018 after falling from its once lofty position. In 2008, investors regarded it as the “king of the precious metals sector.” However, its fortunes fell precipitously over the past decade. Silver has accompanied platinum in the lower priced metals sector while gold and palladium have reached “appreciably higher” prices than they had at their peak in 2008.
The severity of the decline in the price of platinum has produced a downward spiral since 2014. The industrial world has turned its back on it and favored palladium instead. Investors tended to reject it after their disappointment in its performance during the financial crisis.
A steep drop of 67 percent in the five months between March and October 2008 created a “carnage in the platinum market” that investors remember distinctly. Analysts at Seeking Alpha note that platinum has experienced a consistent downtrend since 2011 and that it has earned recognition as “the worst performing precious metal since 2014.”
The Motley Fool points out that the largest use of the platinum group of metals rests with the automotive industry and its production of catalytic converters. Several automakers have plans to produce hydrogen-cell vehicles, but a problem may occur with the requirement for “significantly more catalytic material” than diesel or gasoline vehicles use.
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