Can Gold Destroy the Platinum Market?
Source: Wealth Daily, Greg McCoach (12/18/09)
". . .what's good for gold may be devastating to other members of the precious metal family."
Today, technical breakthroughs in automobile emissions devices may have just ended that wait.
Gold may be the next generation of "technology metals," but what's good for gold may be devastating to other members of the precious metal family.
In fact, advancing technologies in autocatalysts may cause. . .
Demand for Platinum and Palladium to be Cut in Half
One of the biggest risks to platinum and palladium prices has always been their heavy dependence on the automobile industry.
That's because more than half of the world's demand for these metals comes from the global autocatalyst market.
So a new autocatalyst technology that doesn't require their use puts platinum and palladium prices in a very sensitive situation.
And that's exactly what started to worry platinum and palladium investors when one company developed a new metal alloy that substituted traditional catalyst metals for gold.
Privately owned Nanostellar Inc. recently designed and developed a new metal alloy for autocatalysts using gold for the first time. It says the new alloy can improve diesel emissions control catalysts by 25%–30%.
The substitution of gold for platinum in autocatalysts even makes good economic sense.
Gold is 10 times more abundant, and therefore has always been much cheaper than platinum.
Will Gold Completely Replace Platinum or Palladium?
For now, probably not. At the moment, the financial incentive to use gold over platinum is no longer quite so attractive.
Gold prices are currently about $1,100 an ounce, compared to ~$1,400/oz for platinum. Even though gold is still 20% cheaper than platinum, the additional research, development, and manufacturing costs whittle this savings down.
Ultimately, if gold should progressively replace platinum in autocatalysts, platinum prices would quickly fall, making it again more cost-effective.
So it appears that the only real advantage gold has in this context is its more favorable supply profile.