Platinum & Palladium: The Other White Metals

 Platinum Coins

Gold is often touted as the precious metals king, but after a strong start to 2014, the price has steadily fallen, affecting investor sentiment and shaking the confidence of gold coin investors.  That’s why diversification is so necessary. Whether or not the inevitable rally in gold prices will occur in the short term or over the next few years, demand, and subsequently returns, has been strong in the platinum and palladium markets; which are oftentimes viewed as the other white metals to silver.  While an April 2014 Reuters article indicated that high liquidation levels have contributed to the lowest sales in gold bullion since 2007, demand for platinum seems to be on the rise.

Mining Strikes in South Africa

Strikes often shift attention toward investment areas that are out of the public’s immediate focus, and also alert readers to possible near term deficits. South Africa strikes, which began in January, and show no signs of ending soon, mixed with a 15,000 ounce gap in Russian production, have limited the release of new supplies of platinum to the open market. A Mineweb article points to a 1975-level shortfall in platinum (over 1.2 million ounces), mixed with the South Africa strike, as a compelling supply-and-demand sequence for rising platinum prices – even if nearly 200,000 ounces are recycled for use.

Why the Metals Are Performing Well

In “Precious Metal Platinum Quickly Turning Chinese”, Forbes says that European demand for cars mixed with Chinese demand for jewelry will fan the flames of desire for ownership. Urban Chinese women are gravitating toward platinum wedding rings, as rising rates of personal income in China accounted for nearly 25% of platinum jewelry demand in 2013. Between 2012 and 2013, the Shanghai Gold Exchange showed an almost 50% spike in platinum futures trading.

Importance and Industrial Uses of Palladium

Palladium, which is considered a platinum group metal (PGM), is a metal with a low profile in the media, but with proven market uses: platinum substitution in catalytic converters, jewelry and electronics manufacturing, chemical applications, and dental work. Mineweb showed a projected and similar supply-and-demand shortfall, with a 34-year gap of over 1.6 million ounces, due to lack of production in both South Africa and Russia. Unlike with fiat currency, an ‘easing’ in supply will increase metals prices, and possibly hamper the production of emission-reducing catalytic converters for new cars on the market. Additionally, China has recently announced new emissions standards, which is expected to remove approximately 6 million vehicles from the road, so there will likely be high demand for the metal as existing vehicles are replaced with more emission-friendly autos.

Like silver, which is usually a byproduct of copper or gold mining, palladium is primarily found alongside platinum in South Africa and Russian mines. Per the North American Palladium website, less than 15% of the metal is mined in the United States. In December 2013, Kitco projected a nearly 10% worldwide supply deficit contributing to rising palladium prices, which may make it a good idea to invest in a few Chinese Pandas or American platinum eagle coins. For a current inventory of our platinum and palladium coins and bars, click here.

Tony Davis
Tony Davis