Gold vs. Silver vs. Platinum

Source:

...What's interesting is the percentage of gold that goes to investment. While a much larger percentage of gold is used for investment purposes than silver, it's still less than 20%. By far, gold's most common use is in jewelry. This leaves gold vulnerable to the fickleness of consumer confidence and disposable income...

... In the beginning of the year, the gold story was seen by many commodities investors as "played out," and the focus on the real industrial demand for platinum took center stage - leading to the spike in platinum prices in the first few months of 2008. It didn't hurt that South African platinum miners were coping with unprecedented power difficulties, shuttering mines and reducing the supply of platinum worldwide.

Silver, which also has an industrial bent, eventually caught up to platinum's rise in March, before dropping back a bit.

Gold, however, was the laggard. For the first half of 2008, gold limped along like a marathon runner at mile 24, barely squeezing out positive returns through the middle of the year. The reason? The emerging markets/China story is much weaker in gold. Sure, Chinese consumers may buy a little more gold here or there as they join the middle class, but there's no "omigosh, we're running out of oil because of surging Chinese industrial demand!" ...

What's interesting is the percentage of gold that goes to investment. While a much larger percentage of gold is used for investment purposes than silver, it is still less than 20%. By far, gold's most common use is in jewelry. This leaves gold vulnerable to the fickleness of consumer confidence and disposable income. In hard economic times, demand for luxury items is the first to decline.

On the other hand, silver and platinum are used most commonly for industrial uses. We'd expect demand for both to fall in a slowing economy. In both cases, the declines in demand for industry and jewelry are difficult to predict, but common sense would tell us they'll be lower in a bad economy than a good one...

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