After a few conversations with friends and acquaintances I see that many think that Gold and Silver are overbought. This is a valid concern. Now I still do not believe Gold is overpriced. It may not be a bargain anymore. But it is not overpriced. You may even be paying a small premium for it. But for the value it offers as an inflation hedge, I say damn the premium.
But this post is not about Gold and Silver. It is about other inflation hedges. We’re still in precious metals here. Let’s look at platinum and compare it with Gold
1. As rare as Gold. So all things being equal it should be priced the same as Gold. But all things are not equal
2. Platinum deposits are more spread out than gold is and come in smaller quantities per mine. Okay, this may make it a little bit more expensive than Gold to extract. This is because the initial outlay is higher. You have to set up equipment in more places to mine the same amount.
3. Has industrial uses in spite of it’s high price. Catalytic converters. Again this should make it more expensive than Gold
4. Resistant to corrosion like Gold. Equal to gold in this respect
5. Not a long history of use. Recent discovery.
It is #5 that makes platinum so interesting to me. If you leave out #5, platinum should be more expensive than Gold. And indeed platinum has traditionally been more expensive than Gold precisely for these reasons. So what’s been happening the last few months? Why is platinum lower than Gold? Aaah, My friend. This is where #5 comes in.
Let me ask you this? Have you ever tried to purchase physical platinum? Physical gold? Anyone who has tried will tell you that physical platinum is far harder for an individual to purchase than physical Gold. And why is that? Because Gold has been in human consciousness since the days of the barter system. Platinum has been around only in the last 200 years. When people lose confidence in currency, they turn to Gold. Not platinum. Why? Because Gold has been around much longer. So in recent months people are losing faith in national currencies and their thoughts are turning towards Gold. Not platinum. And this, my friends, the reason for Gold to be more expensive than platinum these last few months.
But here is what I anticipate. People will start thinking about platinum as well. As an inflation hedge. As an alternate to Gold. Soon. They will start thinking about it as an inflation hedge. They will make enquries. And suddenly coin dealers will start offering physical platinum. There will be platinum jewelry. Remember 2005? Compare the number of Gold dealers now to the number in 2005. Did UOB offer and Gold and Silver account in 2005? Did Everbank? Did Goldmoney, bullionvault, GoldAFE exist then? As of now only Goldmoney offers platinum. Soon, the others will. UOB will. Everbank will. In India you have to go all the way to bombay to pick up some platinum. But one day, platinum dealers will sprout like mushrooms after an afternoon shower. They have to. Governments are bent on inflating their currencies and people are becoming more desperate for options to protect their hard earned savings. Stocks are a scam. Real estate is a bubble. Bonds yields are low. Gold is on everyone’s mind. Platinum is still in the subconscious. One day, it will come to the surface of human consciousness. And what, my friend do you think will happen to platinum then?
And as for palladium, do your own research guys. And let me know what you find. Be sociable. Share.