Is Platinum “White Gold”, Or Is It Different? by Dan Popescu, GoldBroker.

Silver is poor man’s gold. What is then platinum with respect to gold? In a recent article (The Gold/Silver Ratio – Gold, Silver, and their Relationship) I looked at the relationship between gold and silver, the eternal couple. Let us look now at the relationship, if there is one, between gold and platinum. Is platinum “white gold”, or “little silver” as the Spaniards call it, or is platinum different from gold and silver. Gold and silver but also copper have been for thousands of years monetary metals; not chosen by decree but by experiment through trial and error. They were also found together in the Earth’s crust as Electrum (a naturally occurring alloy of gold and silver, with trace amounts of copper) taking different colors going from red to white depending on the concentration of each metal. Its name derives from the Spanish word platina, which is literally translated into “little silver”. Being a heavy metal, it leads to health issues upon exposure to its salts, but due to its corrosion resistance, it is not as toxic as other metals. As a pure metal, platinum is silver-white in color, lustrous, ductile, and malleable but has an extremely high melting point (1,768-Celsius vs 1064-Celsius for gold and 962-Cesius for silver). Platinum is more ductile than gold, silver and copper, thus is the most ductile of pure metals, but gold is still more malleable than platinum. Platinum is obtained commercially as a by-product from nickel and copper mining and processing.

Platinum is a much more recent discovery contrary to gold and silver whose history goes beyond 5000 years. Pre-Columbian Americans near modern-day Esmeraldas, Ecuador used the metal to produce artifacts of a white gold-platinum alloy. The first European reference to platinum appears in 1557 in the writings of the Italian humanist Julius Caesar Scaliger as a description of an unknown noble metal found between Darién and Mexico, “which no fire nor any Spanish artifice has yet been able to liquefy”. In 1741, Charles Wood, a British metallurgist, found various samples of Colombian platinum in Jamaica, which he sent to William Brownrigg for further investigation. In 1750, after studying the platinum sent to him by Wood, Brownrigg presented a detailed account of the metal to the Royal Society, mentioning that he had seen no mention of it in any previous accounts of known minerals. (1)

Even though platinum is 1.67 times more abundant than gold on the Earth’s crust the miming supply of platinum to the market is 15.5 times less than that of gold. This shows that it is much harder to extract platinum than gold.

 

Chart #1: Abundance of Precious Metals in Earth’s Crust

Abundance of Precious Metals in Earth Crust Platinum

If we compare the Stock-to-Flow of platinum to that of gold, we clearly see that there is close to 60 years of aboveground gold stock while at the same time there is only 9 months of aboveground platinum stock. This shows that the mining supply of platinum has approximately 60 times more impact on price than it does for gold while the aboveground stock of gold has a lot more impact on price. Not only there is a lot more gold than platinum stock but also the gold market is very liquid and gold can be brought to market on short notice and at very low cost.

Chart #3: Gold Stock

 

Chart #4: Platinum Stock

 

Gold mine production represents 70% of total supply but with a very large above stock supply versus 81% for platinum with almost no aboveground stock. In 2013, 84.79% of all platinum supplies came from South Africa and Russia (71.91% South Africa, 12.88% Russia, Zimbabwe 6.88%). As for gold, the largest producer in 2013 was China with only 14.50% followed by Australia and Russia with 8.80% and 8.23% respectively.

 

Chart #5: Gold Supply

 

Chart #6: Platinum Supply

 

If we look now at the demand of gold and platinum we can again see major differences. 92% of the total demand for gold is investment and jewelry. I always had a problem in differentiating investment and jewelry demand when it comes to gold. In the Middle East, India and China, high carat gold (over 20 carats) is mostly for investment purposes or better said wealth preservation even if it is in jewelry form. Gold is well-preserved and taken care with the intention of returning it to market one day. Industrial demand is on the other hand wasted or very hard and costly to recover and recycle. As for platinum, we can see that only 35% represents investment and jewelry demand while 65% is industrial and therefore wasted. Only 19% (6% jewelry and 13% auto catalyst scrap) returns to market.

 

Chart #7: Gold Demand

 

Chart #8: Platinum Demand

 

Jewelry, which is a disguised form of store of value still, has not adopted platinum. As we can see in chart #9, the jewelry industry is dominated by silver with 72% of the demand and gold with 27%. Platinum and palladium together represent only 1% (0.82% for platinum and 0.21 for palladium).

 

Chart #9: Jewelry Demand for Precious Metals

 

In addition, we must not ignore the official demand and supply. In the case of gold, central banks hold more than 30,000 tonnes of gold, 17% of the global gold stock, while at the same time they own no platinum. Gold is still a monetary metal while platinum is not and has never been. Silver on the other hand has been a monetary metal and as poor man’s gold it is strongly influenced by monetary issues through its close relation to gold. However, even if platinum has never been a monetary metal, we should not exclude the possibility of platinum playing a role in a future collapse of the present dollar based monetary system. We have seen very recently in India that, when the government banned the importation of gold, a sharp increase in the demand for silver and platinum occurred. Platinum is a precious metal and under the right conditions it can be an alternative to gold. Platinum also requires less space to store than silver for approximately the same price as gold.

 

Chart #10: Global Gold Stock

 

Autocatalysis represents a very large part of the demand for platinum at 43%. There are justifiable fears that any alternative to platinum in the fabrication of autocatalysis will collapse the price as it happened with silver’s loss of

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