Precious Metals Quarterly

CPM Group expects the prices for gold, silver, platinum, palladium, and rhodium to rise sharply, in ways similar to upward spikes seen in 1979 – 1980 and again from 2007 into 2011, at some point. We do not expect these spikes to occur in 2018. In fact, unfortunately for investors seek-ing immediate capital appreciation, CPM sees prices as most likely moving sideways to slightly higher for most of these metals this year. However, at some points in the next five to ten years, prices seem likely to spike sharply higher once again for all of these metals.

The price spikes will be caused by different develop-ments. For gold and silver, some combination of gather-ing economic, financial system, and political issues seems most likely to lead to the next bull market. After all, such potent mixtures of external events were behind the past bull market spikes to sharply higher prices, in the 1960s, at the end of the 1970s, and again a decade ago. For the platinum group metals, it seems more likely that further significant declines in South African PGM mine production while the auto industry is still producing al-most exclusively (more than 90%) petroleum-based vehi-cles will lead to the next bull market.

CPM Group has been writing for a few years now that it considered the gold and silver markets to have reached cyclical bottoms in prices in late 2015 or early 2016, and that these markets were in the early stages of what should be expected to be multi-year bull markets. Further, CPM has stated several times that it expected gold and silver prices to rise sharply at some point over the next three to 10 years, with the potential for gold to reach record levels surpassing those seen in 2011 and 2012.

CPM has been expecting gold and silver prices to reach new record levels in the period 2021 – 2024 for a few years. Updating our supply and demand fundamentals, along with our view that economic and political condi-tions will spur even greater investment demand for gold and silver in the next seven years than we earlier had ex-pected, we have increased our targets as to how high gold prices might go in the next bull market.

Similarly, our expectations of higher PGM prices for at least a time in the coming decade is predicated on a de-tailed analysis that suggests South African PGM output,

already one-fifth lower than it was a decade ago, is likely to fall further over the next decade in advance of any ma-jor decline in PGM use in auto catalysts, leading to tighter supplies and consequently higher prices.

Triggers

CPM Group’s long-term price projections are predicated on a mix of trends in each commodity’s fundamentals with a macro-economic view of the economic, financial, and political environment that affects and determines those trends in supply, demand, investment demand, in-ventories, and other market segments.

Our present view of the global economy and conse-quently commodities markets and prices has imbedded in it the view that there could be a short, shallow recession perhaps limited to the United States in late 2018 or 2019, followed by an anemic recovery in economic activity for a few years, with a much more significant global finan-cial crisis and economic downturn possibly emerging around 2022 – 2024. Timing recessions and financial cri-sis is more art than science, although there are a number of economic and econometric tools that help time issues visible on the horizon.

As a result of these economic projections, our expecta-tions are that gold and silver prices could rise sharply at some point in the coming decade, when a number of eco-nomic, financial, and political constraints combine to lead investors to move more forcefully into these precious metals, at least for a year or two.

We note that investment demand for gold and silver al-ready is at historically high levels, although down from the levels that took gold and silver prices to record levels in 2008 – 2012. We do not see current levels of invest-ment demand and prices as peaks, however. Rather, they are viewed as the new bases from which both investment demand and prices will rise further the next time the eco-nomic and political environment inspires investors to rush even more dramatically back to gold and silver.

Special report for Strategic Wealth Preservation and its clients.

26 January 2018 The Next Bull Markets In Precious Metals

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Commodities Research and Consulting, Asset Management, and Investment Banking

CPM Group, founded in 1986, is an authoritative commodities research and consulting company. It is independent of all producers, processors, financial institutions, and other companies having commercial positions in commodities. CPM Group has extensive experience in commodities research, trading, and finance, equipping the company to provide finan-cial advice and consulting grounded in hands-on experience.

email: research@cpmgroup.com Telephone 212-785-8320

26 January 2018 Page 2 Precious Metals Quarterly

What Will Happen

Given such strong projections, it behooves CPM to explain what we think may cause the next period of increased, out-sized investor buying of gold and silver. Historians write about the causes and occasions for events to unfold. There can be many causes, but some event or set of events serve as the occasion that triggers the larger event to occur. This paper focuses on the po-tential catalysts for the next round of sharply increased investment demand and prices.

It seems most likely that it will be some combination of financial and economic events. There may be one devel-opment that serves as the trigger or occasion of the change, but it is likely to be the culmination of many fi-nancial and economic trends that lead up to both that causative event’s occurrence and the subsequent effects across markets: Gold, silver, stocks, bonds, and other fi-nancial assets.

We cannot foresee the specific mix of events that leads to a reversal of the present focus on stocks and relatively stable although high levels of investment demand for gold and silver. However, we are pretty sure that much of the bases for the inevitable spike in investment demand and prices for gold and silver will rest in the debt mar-ket. The debt markets – public, private, corporate, and personal, nationally and globally – have not improved since the Global Financial Crisis. They have gotten more problematic. Where in the wide world of debt the cracks first appear is a key question, one the answer to which no one knows. As discussed below, most likely the cracks will appear in smaller, less protected financial arenas.

There are nonetheless certain hot spots in financial mar-kets that are likely to participate in the next spasm of fi-nancial market credit constraints that consequently would lead to a major round of economic problems and a rush to gold and silver.

These include the following. They may be divided into two subsets. The first are the longer term, structural prob-lems facing the world. The second are the smaller prob-lems, which actually are more likely to join in some com-bination to serve as the occasion or trigger for the next round of financial panic.

Structural Issues

• Persistent government deficits,• Ever expanding sovereign debt,• The squeezing out of debt markets of more

productive private sector borrowing by thissovereign debt,

• Probable negative consequences from theFed’s policies of raising interest rates andshrinking its balance sheet, which will con-strain private sector borrowing further,

• Mounting private sector debt,• Long-term unemployment and labor market

surpluses,• Inability to grow consumer demand suffi-

cient to keep pace with production of con-sumer goods and services,

• The mismatch between pension fund returnssince 2008 and their long-term obligations,which are leading to pension funds takinggreater risks in order to try to regain somecapital.

• And more…

26 January 2018 Page 3 Precious Metals Quarterly

Possible Occasions

• Issues such as the hidden illiquidity inherentin the growing open interest of exchangetraded products relative to the underlyingassets’ market sizes,

• The disappearance of market makers, spe-cialists, and other braking mechanisms fromglobal financial markets,

• Program trading,• Weakness in housing markets, in the United

States, China, Europe, and other countriesand regions,

• The perhaps unintended consequences of taxand regulatory changes,

• And the inevitable unforeseen events….

It may seem odd to write about the next financial crisis at this time. In early 2018 volatility in the stock market, bond market, gold, silver, oil, currencies, and other mar-kets are at or close to historical lows. In the financial markets, all seems unnaturally calm.

It is natural in fact to worry at times like the present espe-cially. The reality is that financial markets are grossly under-pricing risk, just as they did in the periods of 1998 – 2000 and then 2004 – 2006. At some point financialmarket volatility is likely to increase sharply, dramati-cally, and suddenly. That would be translated into a verysharp drop in stock prices, a sharp drop in bond prices,and a sharp rise in gold and silver prices. We are not writ-ing about a 15% - 20% decline in stocks. In 2001 and the2008 – 2009, the S&P 500 was virtually cut in half, whilesome other market indices such as Nasdaq declined muchmore.

Persistent Government Deficits and Mounting Sover-eign Debt

Underlying all of this is the politically intractable issue of government deficit spending and mounting debt. Govern-ments around the world are locked in a crunch between politically delivered spending commitments that are not able to be financed except through ever-expanding debt. It must be pointed out here that these entitlements include defense spending as well as the more often discussed so-cial support programs. In the United States, the most egregious example, the government and its associates have pursued a program for six decades to make defense spending a political and social deliverable.

Another key point is to note that the intractability of these economic and financial problems is rooted in the political

structure of governments, especially in advanced econo-mies. From an economic and financial perspective, many of these structural issues could be resolved with surpris-ing ease and lack of pain for the vast majority of citizens. It is the political system that blocks even the easiest, least painful economic policy solutions from being imple-mented.

Unsustainable government spending is viewed by politi-cians and their supporting financial sources as necessary to maintain social order, in order for politicians to be re-elected. It has several long-term negative consequences, however. For one, it leads to ever expanding sovereign debt. This is bad in its own right, but more negatively the rise in government borrowing squeezes out lending to the private sector. Private sector lending, to corporations and individuals, is more productive economically than is lending to governments. Private borrowers tend to use borrowed money to build, buy, and expand things, which adds to the overall economic growth of national econo-mies. Government borrowing goes into infrastructure investment in an ever-decreasing volume and share, how-ever. More and more government borrowing goes to pay-ments of non-productive, unproductive, or less produc-tive programs, reducing long-term growth rates.

As a consequence of this spiral, which has not been ad-dressed effectively by any of the advanced economies’ governments, persistent government deficits and mount-ing sovereign debt are major negative developments set-ting the stage for and underlying future financial crises.

Government debt may be the major cause of such future crises, but it is unlikely to be the occasion that triggers such crises.

Other Stress Points

The occasions will occur somewhere else. To figure out what combination of such factors may serve as a collec-tive trigger, one needs to consider carefully the secondary list of trends listed above, as well as to struggle with dis-cerning other trends not so readily apparent.

The Fed’s policies of raising interest rates and reducing its balance sheet in order to prepare for the next recession and financial crisis, will play an important role in the coming drama. CPM has written it feels these policies are misguided for several years now. The very acts of Fed tightening could well precipitate or contribute heavily to the emergence of the next recession and financial crisis.

26 January 2018 Page 4 Precious Metals Quarterly

So, the Fed’s policies are likely to be a factor. They most likely will not be the trigger, however, since they are so obvious and important that almost the entire world’s fi-nancial sector is focused mightily on these.

The occasion is more likely to appear in an overlooked corner of financial markets, just as the collateralized debt obligations built on shoddy U.S. mortgage industry practices served as the occasion in 2007 – a part of finan-cial markets that many participants were unaware even existed until it became a problem.

In searching for overlooked corners of financial markets that have unsustainable structures, the departure of mar-ket makers, the rise of electronic, mechanical trading, and the mismatch in liquidity between ETFs and the underly-ing asset markets all pop to the front of consciousness. Indeed, the mismatch between ETF open interest and the volume of underlying assets is very similar to that which existed, and exists again, in the U.S. mortgage and hous-ing market.

Back in the period before 2007 there were economists and regulators who expressed concern over the enormous volume of CDO assets relative to the size of the underly-ing asset markets. Bankers continued deprecated such concerns, saying that such derivative volumes could be ‘netted out,’ reducing the size of the imbalance to man-ageable ratios. The counter argument that such ‘netting’ only worked if it was simultaneously was written off in the bankers’ testimonies as being an issue that only non-practitioners found worrisome. In the final event, it was exactly the fact that ‘netting’ is not simultaneous that started the GFC. Bad government responses, primarily by the U.S. Treasury, compounded that problem.

All of this points to the idea that the next financial crisis and recession will begin in some esoteric, overlooked corner of the global debt market, or maybe several such corners. ETFs, taking an ever-growing proportion of in-vestor funds, is a good candidate, as is the nature of elec-tronic financial markets. The growing imbalance between the size of the ETF derivatives markets’ open interest or outstanding obligations, on the one hand, and the sharply less liquid markets for many of the underlying assets, poses enormous risks for the overall financial market. Just as the liquidity and credit crunch in the CDO market led to a freezing of global credit that caused a plunge in all asset values, a seemingly minor liquidity event in a series of ETF derivatives could trigger a similar global financial crisis in the future.

2017-Year In Review

Gold

Gold prices continued to rise for the second consecutive year in 2017. Gold prices rose 14% by the end of 2017 from the end of 2016, on a Comex nearby active futures month settlement price basis. Gold’s performance during 2017 was in line with CPM Group’s expectations at the beginning of 2017 as can be seen in this quote from our January 2017 Precious Metals Advisory.

“The road ahead is likely to be bumpy. While prices are not expected to skyrocket during the year, they are ex-

pected to rise. Meanwhile, to cautiously use a term CPM normally derides, the downside seems fairly limited. The uncertainties and risks facing the global economy, finan-

cial markets, and political structures cannot be over-emphasized.”

The strength in gold prices during 2017 added to CPM Group’s conviction that gold prices bottomed out in De-cember 2015. The rise in gold prices during 2017 was against several odds, making the increase in prices even more meaningful. Some of the headwinds that gold prices battled included a generally improving global economy, record levels in equity markets, and a normalization of U.S. monetary policy. Gold performed well given these conditions, with political factors underpinning prices.

Silver

Silver’s price performance was relatively lackluster dur-ing 2017, with prices rising at half the pace of gold prices. Silver finished 2017 at $17.14, up from $15.98 at the end of 2016. On an annual average basis, silver prices fell slightly to $17.09 in 2017 from $17.14 in 2016. This is compared to a 9.3% increase in 2016 from the previous year. The lackluster performance of silver over the course of 2017 was in sharp contrast to that in the previous year when shorter-term trend-following investors, alongside longer-term investors, purchased the metal and drove prices sharply higher.

Silver prices started 2017 on a strong note. The metal was unable to hold onto its gains, however, taking an espe-cially hard beating toward the end of the year when insti-tutional investors on the Comex build large short posi-tions in the metal and drove prices down sharply. While gold was able to withstand a lot of the economic head-winds, silver, its more volatile cousin, saw prices respond more dramatically. While global political turmoil throughout 2017, prevented prices from declining signifi-

26 January 2018 Page 5 Precious Metals Quarterly

cantly below levels seen in 2016 the relatively healthy economic environment kept a lid on prices. Continued strength in the equities markets played a part in weighing on silver prices throughout 2017.

Platinum

Platinum moved in a relatively tight range during 2017, with prices capped by softer fabrication demand and suf-ficient South African mine supply.

Over the course of 2017 institutional investors were mixed on Nymex platinum as they increased both their gross long positions and gross short positions in the metal. As a result the levels of gross longs and gross shorts were at historically high levels at the end of 2017. What is clear is that investors are more interested and active in platinum futures than they were in the past, and that this interest is manifested on trading both sides of the market. Meanwhile, investors were net buyers of plati-num ETPs last year, helped by buying of two South Afri-can platinum ETPs – NewPlat and AfricaPlatinum.

Most key auto markets recorded strong growth in com-mercial vehicle sales during 2017, with the European market reporting robust growth during the January-November period. While less positive sentiment on the decline in diesel’s market share in the European passen-ger vehicle market persisted, such a decline has been gradual to date. Nearly half of all new cars still run on diesel in Europe. In the fifteen European Union countries, diesel’s market share fell from 52.1% to 49.9% between 2015 and 2016. One thing that could be overlooked is that hybrid vehicles and heavy duty diesel cars still use platinum, palladium, and rhodium auto catalysts, helping underpin demand from the auto sector.

Palladium

The price of palladium soared over the course of last year, up more than 55% to $1,061.00 at the end of 2017 from $683.25 at the end of 2016. On an annual average basis, prices averaged $867.4 last year, an increase of 41.3% from an annual average of $614.0 in 2016.

The palladium market has been in a multi-year surplus over the past decade, although this surplus is much smaller than that in the platinum market and is narrow-ing. From 2016 to 2017, the palladium market has tight-ened significantly due to a combination of lower mine output, soft scrap recovery and rising fabrication demand. The emergence of new investors, those who never had participated in the palladium market, on top of a tighter physical market added to the upward pressure on prices. As a result, palladium prices repeatedly hit multi-year

highs and eventually traded at a premium to platinum prices for the first time in history.

Over the course of 2017, institutional investors on the Nymex significantly increased their gross long positions in palladium, and when they did so, they also built up some fresh short positions in the metal, although the pace of their short building was much slower and milder than that in their long-building. At the end of 2017 institu-tional investors’ gross longs were at historically high lev-els while their gross shorts were at historically low levels, suggesting palladium prices will be vulnerable to massive liquidation and/or short building if there is a turnaround in investor sentiment in 2018.

Investors remained net sellers for the full year of 2017 of their holdings in palladium ETPs, with a big part of the selling occurring in two South Africa-based palladium ETPs, Standard Bank palladium ETP and ABSA palla-dium ETP. The U.S. Mint began sales of palladium coins in September last year. Theoretically, the introduc-tion of a palladium coin would help draw attention to pal-ladium from investors new to this metal, and that a lim-ited mintage could lead investors who are unable to se-cure U.S. Mint palladium coins to turn to other palladium coins and investment bars, further increasing investor demand for palladium. Nonetheless, a total of 15,000 ounces of palladium were sold in September only for 2017, suggesting tepid investment demand for palladium coins in a rising price environment.

Demand indicators from the auto sector, the largest end-use market for palladium, were mixed during 2017. Auto sales in China continued to register strong year-on-year growth, while consumer purchases of automobiles in the United States declined after sales hit a record in 2016. Global semi-conductor sales, on the other hand, re-bounded strongly last year after a decline in the previous year.

Rhodium

Rhodium prices more than doubled at the end of last year from the end of 2016, boosted by continued tightness in newly-refined rhodium supply relative to fabrication de-mand. Investors and dealers took note of the degree to which metal was not readily available from producers to meet the orders, encouraging them to hold on to their own stocks and wait for somewhat higher prices before selling more. On an annual average basis, rhodium prices averaged $1,109.35 last year, up 59.8% from an annual average of $694.16 in 2016.

26 January 2018 Page 6 Precious Metals Quarterly

2018 – The Year Ahead

Gold

As we head into 2018, CPM Group expects volatile global political developments, but economic and financial markets to continue to move steadily forward as they have through most of the past year. At some point eco-nomics and financial markets are expected to become more volatile, but it may be late 2018 or beyond before that happens. In such an environment gold prices are ex-pected to tread sideways to slightly higher. Gold prices should be expected to move sideways to higher, provid-ing an opportunity for investors to increase their gold holdings. CPM projects gold prices will rise about 2.3% to $1,288 on average in 2018, rising modestly during the year.

CPM Group’s expectations are for gold prices to rise at an accelerated pace during 2019 and to rise to new record annual average prices between 2021 and 2024. Gold prices are projected to rise over the next five to ten years based on a combination of economic, financial, and po-litical factors stimulating increased investment, continued central bank buying, and a decline in mine production after 2019. The next twelve to eighteen months could provide the best opportunity to increase gold holdings in a portfolio before the market begins to rise at a strong pace.

Silver

Silver prices are forecast to average $17.75 in 2018, up 3.8% over 2017. While growth in silver prices are fore-cast to outpace growth in gold prices during 2018 the relative value of silver is expected to continue lagging that of gold. At the end of 2017, the gold to silver ratio stood at 77. This ratio is expected to decline over the course of 2018, to 72.6 on an annual average basis. This is still well above the historical average of 56, however. Given the forecast for higher gold prices in the medium term, the present relative discount of silver prices to gold suggests that there could be a significant upside potential for silver when prices begin to move. CPM Group does not expect this more aggressive move higher in silver prices to occur until at least 2019. Given the historic volatility of silver prices, silver prices should be and can be expected to rise sharply higher very quickly. A combi-nation of this volatility, near 30% premium in the 2018 projected gold-silver ratio to the historical ratio, coupled with improving fundamentals are all factors that make silver a compelling investment at present levels.

As in the case of gold, CPM Group believes that 2018 would provide a good buying opportunity for silver in-vestors. Not only is the metal relatively undervalued, but there also are several fundamental reasons (supply and demand) coupled with lurking political and macroeco-nomic problems for investors to purchase silver at present levels. Investors are forecast to add 124.8 million ounces of silver to their holdings on a net basis during 2018.

Platinum Group Metals

As discussed at the start of this report, CPM expects platinum and palladium prices to be relatively subdued during 2018, with the potential for a multi-year sharp spike higher in prices at some point over the coming dec-ade. While gold and silver prices are seen as rising in a similar fashion in the long run due to investors pouring into these metals as alternative stores of value and hedges against a host of economic and financial issues that may come home to roost in the years ahead, PGM prices are expected to rise more on fundamental trends: Lower South African production in the next several years pre-ceding any major decline in fabrication demand for these metals from the auto industry.

Expectations of seasonal price strength in the precious metals complex should help support platinum and palla-dium at their present levels in the first quarter of 2018. Prices of the two metals are expected to continue to de-part from each other for the rest of the year after moving in different directions in 2016 and 2017, reflecting differ-ent fabrication demand trends and varying investor inter-est in the two metals markets.

Platinum

Platinum prices are likely to move sideways with limited downside over the course of 2018. On the upside, prices may be capped by ongoing adverse fabrication demand trends, which have been in place for the past few years. It is worth noting that these less-positive trends are well-known to platinum investors, and are priced into the metal market. On the downside, prices should be sup-ported by an expected slowdown in mine supply growth starting 2018 and several years thereafter. In the mean-time there could be occasions throughout 2018 when an-nouncements of supply disruptions, whether they are coming from labor issues or production curtailment, and/or financial stress from South African mining companies could help stimulate bouts of investor interest in the physical metal, pulling prices higher at any given time. In addition, spillover effects from the price movements of gold, possibly stemming from global political issues and

26 January 2018 Page 7 Precious Metals Quarterly

potential economic and financial uncertainty, also could push platinum prices higher at some point during 2018.

On an annual average basis, platinum is forecast to aver-age $960 this year, up 0.9% from an annual average of $952 last year.

Optimism surrounding the prospect of electric vehicles (EVs), which do not use PGMs, intensified during 2017, which to some extent played a part in keeping platinum prices in a range over the course of last year. Such posi-tive sentiment has its merit in that prices of lithium-ion batteries are declining and that advances in technologies are helping increase EVs’ driving ranges and reducing recharging times. However, what one may miss is that positive developments in areas including battery price, driving range, recharging time, battery size, and battery safety, have not reached to a point where EVs are becom-ing as economical and practical as cars with conventional engines that use gasoline or diesel. CPM Group thinks it

remains to be seen whether battery EVs will become the go-to technology in the next decade or so. It could very well be the case, but then the transition from automobiles with conventional engines to EVs lies beyond the coming decade. Therefore, EVs are not an immediate and me-dium-term threat to uses of PGMs in automobiles.

CPM Group’s analysis also has suggested that a decline in diesel market share is a gradual process and is unlikely to result in a sharp drop in the use of platinum in auto catalysts in diesel cars in the next few years. The plati-num market is far more likely to suffer from falling mine output before it suffers from sharp reductions in platinum use in auto emission catalysts.

Platinum investors are presently factoring in the less bull-ish factor from the demand side, and are yet to begin to price in the supply-side slowdown that could occur in the medium term. Since South African platinum supply is likely to fall sharply before auto use declines on a long-

SILVER GOLD

PLATINUM PALLADIUM

$700$800$900

$1,000$1,100$1,200$1,300$1,400$1,500$1,600$1,700$1,800$1,900

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

P

Actual

$800

$900

$1,000

$1,100

$1,200

$1,300

$1,400

$1,500

$1,600

$1,700

$1,800

$1,900

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

P

Actual

$150$250$350$450$550$650$750$850$950

$1,050$1,150

2009 2010 2011 2012 2013 2014 20152016 2017 2018 2019

P

Actual

$8

$12

$16

$20

$24

$28

$32

$36

$40

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Projections

Actual

26 January 2018 Page 8 Precious Metals Quarterly

term basis, the platinum market is likely to experience a period of several years of tight supply of newly refined metal relative to fabrication demand, which could push platinum prices sharply higher. Such a move may be a few years away, however. The price of platinum has lim-ited downside from present levels, which should allow investors a good entry point to benefit from the healthier future supply and demand fundamentals in the metal’s market.

Palladium

Palladium prices are expected to extend last year’s strong performance in early 2018 as investors tend to build on an existing trend. Expectations of seasonal price strength in the precious metals complex in the first quarter also should help support palladium prices at elevated levels.

However, an expected slowdown in the U.S. and Chinese auto markets, an increase in palladium secondary supply, and large investor inventory may weigh on prices later in the year. Palladium prices could come down from their elevated levels but should be expected to remain higher than 2017 levels on an annual average basis. The annual average palladium price is projected to be around $953 in 2018, representing a 9.9% increase from last year.

On the upside, continued congestion on the Nymex palla-dium futures contracts should provide upward momen-tum to prices in the near term. Palladium prices may need some fresh bullish catalysts to rise significantly higher after having risen more than 55% at the end of 2017 from the end of 2016.

When palladium prices begin to decline in a sustained way, possibly after the first quarter of 2018, investors could begin purchasing palladium coins, although such investor buying is expected to only offer some underlying support to prices instead of propping up prices signifi-cantly higher considering

While palladium fabrication demand from the auto sec-tor, the largest end-use of the metal, is likely to slow down in 2018, the total volume is forecast to be still high due to the sheer size of the U.S. and Chinese auto mar-kets. This is expected to provide strong downside support to prices.

Palladium may have more downside risks than upside momentum in the medium term. The main reason behind the price rally in palladium last year was that a group of new, trend-following investors that had never had expo-sure to palladium entered the market and bought the metal in a quick fashion on expectations of further price increases. This very group of investors could easily exit the market when palladium prices start to decline in a meaningful way and/or the tight conditions in the palla-dium market start to ease in a sustained fashion.

Rhodium

In the first quarter of 2018, decent demand from automo-bile and chemical sectors and continued tightness in the physical market are expected to help rhodium prices ex-tend the strong performance last year. Seasonal price strength in the precious metals complex in the first quar-ter also may provide further positive cues to prices. Prices could come off later in the year, weighed down by a projected slowdown in two key auto markets, the United States and China. Investors, including those in-vesting in rhodium ETPs, also may take profits on higher prices, temporarily pushing prices lower. That said, prices should be expected to remain higher than 2017 levels on an annual average basis, helped by tighter mar-ket conditions and ongoing positive investor sentiment toward palladium and rhodium.

About Strategic Wealth Preservation (SWP)

Strategic Wealth Preservation (SWP) is a fully-integrated precious metals dealer and secure storage provider specializing in the acquisition and secure storage of precious metals for individuals, companies, trusts and wealth management professionals on behalf of their clients. We offer global vaulting solutions in the Cayman Islands, Toronto, New York, Miami, London, Frankfurt, Zurich, Lichtenstein, Hong Kong, Singapore and Australia. We have partnered with major US wholesalers and mints to create highly liquid two-way markets for precious metals trading within our vaulting locations. We also hold the distinction of being an approved storage facility for precious metals held within self-directed Individual Retirement Accounts (IRAs) for American citizens and are the approved distributor of the Royal Mint of England and Perth Mint of Australia. Our website, www.swpcayman.com is an excellent resource to learn more about our company’s services.