Palladium Still Dominates Platinum

The Market Gage - Gold is Elemental

If you haven’t been watching the price of Palladium, it is now trading at more than $100 dollars over Platinum. Some Wall Street Traders continue to sell Platinum futures and buy Palladium futures thinking this spread will continue to widen. I think it’s about time that trend should reverse, so I’ll take the other side of their trade at this point. Just a week ago the difference was just $61 dollars.

The price of Gold holding on after an onslaught of selling over the last few days. Some Wall Street Traders have positioned themselves for the sell off to continue.

First notice day in December, Silver on the CME Exchange had almost 4,000 contracts issued. That’s 20 million ounces of Silver that had no home to go to. Goes to show you there isn’t too much need for 1,000 ounce for manufacturing product these days.

The CME Exchange

The CME has once again broken its own record for transactions in a single month. In November, the CME average daily volume in their Gold Futures contract reached over 416,000 contacts a day. One would think with this much action in the Futures contract the price action in Gold would be off the charts. Unfortunately, that’s not the case.

It seems that the overnight trading activity has increased by 40 percent YOY. Meaning all across the globe, people are relying on the CME to handle all their hedging requirements.

Put your seat belts on, here we go!

CNBC is reporting that the CBOE Bitcoin Futures contracts will begin trading on Sunday. The CME contracts are expected to launch on Dec. 18. Nasdaq futures, plans to launch its own version of Bitcoin futures as early as the second quarter of 2018.

Here is what I expect will be the most interesting aspect of the Bitcoin futures contract. And I expect this to be a significant factor on how the contract trades.

Until now you didn’t have the ability to sell a Bitcoin unless you owned one. When the futures contract is released, you will have the ability to “short” (sell it) without owning the underlying commodity. (And I hesitate to call Bitcoin a Commodity) Anyway, having the ability to sell it at a future date before you own it, and buy it back later, I expect will cause wild gyrations in the price.

Just wait till the professional traders get their hands on this product. I think that will be the news of the day when it occurs.

To start, I expect the exchange to impose significant initial margin requirements on the Bitcoin Futures contract and have circuit breakers in place to stop a huge move in any one trading session. Another interesting piece of Bitcoin puzzle will be where will the underlying price trade in relationship to the Futures contract?

Remember, this will be a cash settled contract. Since this is a non-deliverable product how will the exchange
settle the price each day? Will the exchange care where the Bitcoin price is trading off the exchange?

Anyway, as I’ve said in previous articles, the definition of the term “Wild West” will have a new meaning
when the CBOE and CME future contracts are released.

Have a wonderful Friday.

Disclaimer: This editorial has been prepared by Walter Pehowich of Dillon Gage Metals. This document is for information and thought-provoking purposes only and does not purport to predict or forecast actual results. It is not, and should not be regarded as investment advice or as a recommendation regarding any particular security, commodity or course of action. Opinions expressed herein are current opinions as of the date appearing in this editorial only and are subject to change without notice and cannot be attributable to Dillon Gage. Reasonable people may disagree about the opinions expressed herein. In the event any of the assumptions used herein do not come to fruition, results are likely to vary substantially. All investments entail risks. There is no guarantee that investment strategies will achieve the desired results under all market conditions and each investor should evaluate its ability to invest for a long term especially during periods of a market downturn. No part of this editorial may be reproduced in any manner, in whole or in part, without the prior written permission of Dillon Gage Metals. This information is provided with the understanding that with respect to the opinions provided herein, that you will make your own independent decision with respect to any course of action in connection herewith and as to whether such course of action is appropriate or proper based on your own judgment, and that you are capable of understanding and assessing the merits of a course of action. You may not rely on the statements contained herein. Dillon Gage Metals shall not have any liability for any damages of any kind whatsoever relating to this editorial. You should consult your advisers with respect to these areas. By posting this editorial, you acknowledge, understand and accept this disclaimer.