Metals Went from Record Highs to a Historic Selloff. What’s Next for Silver, Platinum, Palladium?

Core Viewpoint - The current commodities cycle is characterized by a significant supply shortage, differing from the previous cycle driven by China's growth. Precious metals like silver, platinum, and palladium are experiencing unique dynamics due to their supply-demand fundamentals and geopolitical factors [2][3]. Supply and Demand Dynamics - The average mine takes over 15 years to develop from discovery to production, leading to long cycles in commodities. Current supply deficits for silver and platinum have persisted for five and three years, respectively, indicating strong demand [2][3]. - Precious metals have shown resilience amid geopolitical uncertainties, with silver, platinum, and palladium outperforming gold in the previous year before experiencing a recent selloff [3]. Investment Strategies - Financial advisors recommend that gold should form the foundation of precious metal investments, comprising at least 50% of the allocation, with silver, platinum, and palladium added in smaller amounts based on risk tolerance [8][11]. - The volatility of silver, platinum, and palladium necessitates closer monitoring and rebalancing of portfolios compared to gold, which is viewed as a more stable investment [6][12]. Market Characteristics - Silver is often referred to as "poor man's gold" and has industrial applications that influence its price, while platinum and palladium are primarily used in industrial applications like catalytic converters [5]. - The markets for silver, platinum, and palladium are smaller and more prone to price swings, making them more volatile than gold [6]. Investment Vehicles - Most advisors prefer using exchange-traded funds (ETFs) for precious metals investments due to compliance risks associated with physical metals. However, some clients opt for physical metals for peace of mind [13]. - Investing in gold mining stocks is considered more straightforward than for silver, platinum, and palladium, which have fewer publicly traded pure-play miners [14][15].