The Most Violent Move You Will Ever See In Your Lifetime
Is Setting Up Now
Most young traders learned to thrive and excel in well-behaved, orderly markets. The recent run-up in Gold And Silver offers a tantalizing glimpse as to what happens when large, liquid markets encounter very modest pricing pressure from increased demand. What happens when the same demand hits markets with 1% of the liquidity of Silver and less than 1/10000th the liquidity of Gold?
For anyone who traded the big moves in Platinum and Palladium in the 1980s or the early 2000s, this is not something you will easily forget. Here is the 30 Year Price for Platinum vs. Gold:
Note that these staggering moves were happening when Gold and Silver were just recovering from a long Bear Market. They also occurred when Platinum Above Ground Stocks were well above today’s levels.
One of the best descriptions of the situation comes from the much maligned LBMA London Metals Exchange, yes the exact same LBMA that blew out its Nickel Contract in 2022 and is now in the process of imploding from a very modest increase in the price of Silver:
For gold, calculated cumulative above-ground stocks have barely changed over the past 30 years, staying around 32,000 tonnes, but the platinum inventory levels swing between zero and 30 tonnes. Although the quantity of inventory held prior to 1975 in platinum is unknown, we believe that current inventory levels are close to zero. What is more alarming is that with current demand projection the market is forecast to enter uncharted territory with regard to supply and demand deficits. Price risks remain skewed to the upside and there does not appear to be much prospect of a net inventory accumulation at any stage in the next few years coming in to ease the borrowing market.
The most recent estimates show above ground stocks of Platinum at about 2.5 metric tons, which is even less than the 30 metric tons reported in the older but undated LBMA Report cited above. This puts the above ground ratio at 1 oz of Above Ground Platinum for every 10,000 ounces of Above Ground Gold.
Needless to say, if even a tiny fraction of 1% of the investment demand currently going into Gold, Silver, and Bitcoin get diverted into a market 1/10000 the size, the price moves in the chart above will be quite modest and docile in comparison.
How to trade this?
Stackers of the Physical Metal will do OK but have to pay price premiums and can only get 1-1 leverage.
Traders on various Futures Exchange face the possibility of having the rules changed against them midstream (like what happened to the Hunt Brothers) or have their personal checking accounts raided to bail out well connected executives, as noted in a previous Nuclear Options Substack post.
My personal favorite way of trading this is to use deep in-the-money Call Options on the PPLT Physical Platinum EFT. Then roll the calls over as expiration nears. This limits the cost of carry to the options premium, and greatly increases the leverage in the position.
Here is an illustration:
This morning I sold 100 Shares of PPLT that I purchased in the 2020 COVID Bear Market for 81.00 a share. The sales price of 100 shares today in 2025 was 15000-. Using the proceeds I purchased 10 Call Options 10 points in the money for 13.00 each. The end result is 10x the upside of the original long position, with an extra 2000- in cash to use to buy more options if the market moves down.
Like the passengers on the ill-fated Titan Mini Submarine, we don’t know when the crack up will occur. It might be at 1500 feet below sea level, or maybe at 2100. In any event, we need to be in the game to catch the detonation on the upside. And for any readers thinking about shorting Platinum or even worse, Palladium in this market, David Ruffin wrote a song for just for you.
******************************************************************
Disclaimer : All Content on the Nuclear Option Substack is for Education and Information Purposes only. It does not a soliciatation or recommendation to buy or sell any security. Before trading, consult with your Professional Financial Advisor and read the booklet Characteristics and Risks of Standardized Options Contracts, available from the Options Clearing Corporation.