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LAWRIE WILLIAMS: Russia’s Plaurum sees PGMs more reliable than bitcoin

There has been almost a mania over bitcoin and its cryptocurrency copies recently as the price of the original has accelerated up to $8,000 which the writer sees as a bubble situation just waiting to burst.  It is a currency built almost entirely on sentiment and if sentiment changes we could see it return to from whence it came.  It, in the writer’s view, has no material substance behind it.  What comes from zero could just as easily return there – it is something of a legal Ponzi scheme only having value as long as investors carry on pouring money into it.

Thus it is good to read analysis from others who, to an extent at least, take a similar view.  Rick Rule has recently made the point that in his view bitcoin is a distraction.  It may appeal to the speculator, but he chooses gold for the long term.  And now analysts as Russia’s Plaurum Group have put out a statement that they see precious metals as more reliable and stable than bitcoin.

Plaurum is one of Russian controversial multi-billionaire Viktor Vekselberg’s companies – part of his massive Renova conglomerate - and its main business is in the precious metals sector specialising in the extraction of precious metals from ultra low-grade sources.  Plaurum  itself encompasses a number of associate companies throughout Eastern and Central Europe and China and has sales offices in the U.S.A.

Looking at bitcoin, the Plaurum analysts do note that since 2015 bitcoin has grown substantially from around $300 to $8,000 most recently and that more and more companies all over the world are being involved in this digital currency; some countries start accepting it as a real currency; all this supports economic stability of bitcoin. However, they look at huge parallels in bitcoin’s price surge with that of rhodium in the period of 2003 – mid-2008.

During that time, the analysts note, the price per ounce of rhodium grew from $500 to $10,00 – a similar performance to that most recently achieved by bitcoin. A powerful long-term trend seemed to be developing with heavy growth rates being achieved by the world automotive industry (rhodium’s primary use is as an adjunct to palladium in autocatalysts). At the same time, the world production of rhodium remained almost the same, which caused the chronic deficit of this metal on the physical market provoking the extreme rise of the rhodium prices, lasting till the 2008 financial crisis, which affected all markets. Beginning from June 2008, the rhodium price began a rapid downwards adjustment and in just months it crashed from $10,000 to $1,000. Afterwards it did recover to around $3,000 in 2010, and then during the following six years the rhodium price slowly descended to $600. And only since mid-2016 rhodium has started to grow again.

But, as the analysts point out there is justification in terms of physical supply/demand shortages in relation to the platinum group metals in particular – and we should see price growth in palladium and ruthenium also as indicative of this trend.  By inference they see bitcoin price growth as somewhat ethereal and purely popularity/sentiment based.  There is no underlying material substance to the price growth.

In terms of pgm demand though, Plaurum sees continuing strength in the automobile markets, at least in the short to medium term, and the supply shortages which have been benefiting palladium and rhodium prices in particular are likely to persist and drive prices even higher.  Meanwhile a change in sentiment for the very volatile bitcoin could bring it crashing down.  It’s not so much that bitcoin couldn’t see further gains.  It may do so, but is far more vulnerable to a substantial fall than the pgms where a real shortfall exists.

23 Nov 2017

About the author

Lawrence Williams

Lawrence (Lawrie) Williams is a well known London-based writer and commentator on financial and political subjects, but specialising in precious metals news and commentary. He is a qualified and experienced mining engineer having graduated in mining engineering from The Royal School of Mines, a constituent college of Imperial College, London – recently described as the World’s No. 2 University (after MIT).

e: lawrie.williams@sharpspixley.com

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