Monday, July 22, 2013

Investing In Bullion, Make Gold A Priority (silver price, platinum)

                      Though it's true that for much of history the gold to silver ratio was 12, that trend ended more than half a century ago at a time when gold and silver prices were a lot lower than they are today.  In recent history the ratio has been somewhat erratic ranging from a low of just over 30 (April 2011 gold avg $1474, silver avg $42) to a high of 85 in 2008;  During this period there was a lot of downward pressure on both ironically coming from one of its biggest buyers central banks - rising interest rates cause money to flow out of gold and into other sectors of the economy but gold still stood out, maintaining a price at least 75% of its high, silver however presently trades at only 40% of it's 2011 high of $50.

During the last recession the price of platinum fell below the price of gold, an occurrence that usually only happens during crises  - the last time it happened was in the 1970's when the world's main economic drivers, the US and Europe were going through recessionary periods of low growth, high unemployment, high debt levels and oil prices.

The more recent inverse relationship between gold and platinum dominated the period of August 9, 2011 to January 2013.  Prior to that, since 1986 the price of platinum always exceeded gold with the exception of very few brief periods but even then the difference was marginal.  What this means is that the current economic climate is not as rosy as it's made out to be - the factors now driving gold closer to platinum are the same ones that come into play during times of economic uncertainty (central bank buying, inflation leads to lower confidence in the dollar, causing people to jump onto the bullion bandwagon).

Platinum versus Gold

For bullion buyers, the platinum group metals (pt, pd, rh) provide an interesting alternative to gold but a couple other key factors to consider may make gold the safer option.  In 2008 when rhodium hit $10,000 an ounce before hitting rock bottom a year later (2009 average $1500) investors lost interest in the white metal.  In a healthy economy, demand for platinum and palladium will still be there since both rely on industrial (catalytic converters) and high end markets (white gold plating, platinum jewelry);  however, yearly demand in general is not nearly as high as it is for silver or gold;  2012 platinum demand was about 6 million ounces, 7 million ounces for palladium which is only a fraction of the 155.4m ounces of gold, 1.16b ounces of silver consumed.

2012 exit year - Global reserves of platinum group metals total 2.328 billion ounces (2013 Mineral Commodity Summaries: 66m kg, annual production represents 0.6% of this) versus 1.799 billion ounces for gold (annual production represents 5% of this).  This doesn't sit well with me given that production of gold is some eight times greater than all platinum group metals combined.  As an investor what this tells you is that it's a lot easier to raise mine output to either match higher demand /or to put downward pressure on the price, than it is for gold.  At current prices, gold is just as rare as the platinum group metals but demand remains many times greater.  This is precisely why the rhodium crash of 2008 could never happen to gold (rhodium supply increased substantially as miners saw an opportunity to sell at higher prices but it turned out that demand was not nearly as strong as anticipated).  Platinum may be brighter but from an investment perspective gold still outshines it. 

Demand for platinum has a shiny future - light vehicle production is expected to increase by 13.6% over the next three years, with each vehicle needing a catalytic converter containing four grams of platinum and palladium what that amounts to is an additional 1.54 million ounces of pt/pd demanded.


Getting back to the question of silver or gold which is the better bullion investment, ask yourself this question, is the global economy improving ? 

If it is, then you're focus should be on comodities that benefit when the economy is doing well such as oil and platinum.  If it isn't, buy gold bullion, gold etf's, or gold stocks.  Physical gold has always been a top choice for people looking to protect their wealth against inflation.  Even with mountains of debt Italy still held onto its stockpile of 2400 tonnes of gold reserves at a time when gold prices where higher than ever before.  Italian reserves rank third among countries.
  •  Taking into account the significant drop in price in 2013 gold is still up 300% last ten years.  
  • Silver is produced at ten times the rate of gold.  At many of the world's largest gold mines it takes more than ten tons of ore to produce one ounce of gold. 
  • A number of the world's top investment funds only buy gold.   
  • Only 10% of gold demand last year came from technology/industry much lower than silver's 50% (Industrial uses for Silver photovoltaics, rfid).  What this means is that when the economy isn't doing well silver demand will suffer more than gold demand.

More Uses For Gold In Cosmetics

The use of gold in cosmetics has expanded in recent years.  There's a cream called Biocollasis Gold or liquid gold that's gaining popularity in North America.  It claims to reduce skin wrinkles and improve skin tone.

Other News
Gold traders in Thailand expect the price of gold to be higher in the 3Q of 2013.

China Continues To Invests In Canada's Mining Sector

Last year direct investment into Canada was about $600m, second only to oil.  The Yukon territories is a point of interest, there are a number of polymetallic mines therecontaining zinc, lead, silver and germanium that are being funded by Chinese companies.  In the last eight years Chinese companies spent $2.5b on North American acquisitions, ranking far behind the top two regions, Africa $13b and Australia $12.7b.


  1. At the time of recession,the gold and silver investment may be very helpful for the investors. so people should invest in such commodities to make them stable in their bad time.

  2. In this varying economy trend, it is a brilliant idea to find opportunities to save money for our future. In that concept, I think investing in gold coins and bullion bars is indeed beneficial. Always buy gold coins online that is in demand. If a particular gold coin has relatively low demand, then it will be hard to find a buyer if/when you decide to sell it. So consider the demand factor before fixing your purchase.

  3. We all know that gold and silver are the best metals in which one can invest their money just because it provides great returns in terms of monetary value. I totally agree with your post that gold confiscation is an important issue.

    Keep updating!!
    Gold price today