Platinum Group Metals - Truly Precious


"If the PGMs really are precious, shouldn't they be just as interesting for crisis-investment as gold or silver?"

When comparing gold to other metals that are considered precious, there does seem to be a pretty large discrepancy. Silver would be in a pretty fair relation to gold in terms of its price-'preciousness' ratio (somewhat undervalued), but when you look at the PGMs (platinum group metals) the picture is different.

In 2007, the world produced 78.7M oz gold compared to only 7.1M oz palladium, 6.6M oz platinum and 824,000 oz rhodium. Price per oz in same order (approx.): $930 - $200 - $1,000 - $1,000. Obviously, there is a huge price difference here in relation to production, and these are all considered precious metals, which means that they all are very similar - for example, they don't oxidize particularly easily.

So why the big differences? All of the PGMs had about 50% of their demand coming from the auto-industry for catalysts (in 2007), and we all know what's been happening there lately. In the summer of 2008, rhodium was priced at ~$10,000, while the price-changes for palladium and platinum were not as dramatic, but still a lot larger than for gold or silver.

Apart from the auto-industry, there is a large portion of demand coming from other industrial demand, as well as jewellery (less than 20% on average); the demand for PGMs as investments, although clearly existing, are very small.

If the PGMs really are precious, shouldn't they be just as interesting for crisis-investment as gold or silver? I suppose in the end, if you want to somehow invest in PGMs, it would be on a more ideologically motivated basis - because they are more precious than gold or silver, no doubt about it; but if only a very small portion of humanity actually sees them as truly precious, then they will be ruled by industrial demand. I guess the most important lesson to take home from this comparison of gold-silver/PGMs is that gold could be considered high priced on a preciousness/price ratio, but considered as a potential future currency it would have to be compared to the preciousness of pieces of paper, which would be about infinite to zero.

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