Platinum: Gold’s Big Brother
Gold may be busy grabbing the headlines but it’s bigger, rarer, more versatile and useful brother is quietly doing its job of providing industry and manufacturing with the base elements they need to help run our world. Words: 842
Below are further edited excerpts from the orginal article* by staff at www.oilprice.com:
Most people just know platinum for its expense or it’s appearance in jewellers windows, but this incredible metal is much more than that!
What Exactly is Platinum?
Platinum is a precious metal, which basically means it’s rare, expensive and composed of metallic elements that are scarce.
It’s a silvery white metallic colour (somewhere in between silver and nickel). It’s a very dense metal with an atomic weight of 195.23, making it almost as heavy as gold. It’s malleable, lustrous and ductile and is used in many industries from jewellery to making refrigerators and car parts.
In fact, over 20% of manufactured items use platinum at some point in the manufacturing process with the production of catalytic converters consumes over a third of platinum produced on a yearly basis.
Rarity of Platinum
Platinum is very rare as it’s difficult and expensive to locate and mine. In fact, it’s the rarest of all the precious metals, with an annual production of about seven million ounces. This is less than a tenth of annual gold production.
Over 90% of global platinum supply comes from South Africa (80%) and Russia who have both been cutting back their production targets at a time when demand is increasing by hundreds of thousands of ounces a year.
With reserves and supply limited to two countries this is a danger to production as strikes, political problems or economic issues could lead to a swift reduction in supply which would obviously have a sharp impact on platinum’s price.
Platinum and Industry
As mentioned above, “platinum is used in over 20% of manufactured goods” and the industrial demand is only increasing as we discover new uses for the metal. Platinum is almost un-corrodible, it’s malleable, it has high electrical conductivity and it’s very durable. It’s used in the production of chemicals, fertilizers, computers, gasoline, glass, wires, paints, medicines, cars, explosives & planes, etc.
In addition, you will also find platinum in a great number of items: jewellery, spark plugs, fibre optic cables, fuel cells, hard disc drives and of course catalytic converters because of its high catalytic properties.
Platinum Jewellery
Platinum’s lovely silver blue colour has meant it’s been in great demand in the jewellery business since the 18th century. Jewellery production accounts for over 25% of yearly global platinum production. It has seen a large drop from 2000, however, when it accounted for over 50%, due to its high platinum prices and the popularity of substitutes (silver & gold)
Apart from its colour, it’s also desired by jewellery manufactures for its hardness and strength, its flexibility and also the fact that it’s resistant to corrosion i.e. doesn’t tarnish or oxidise when exposed to air or water.
Another often overlooked benefit of platinum jewellery is that it’s hypoallergenic, so it’s a great choice for people who have reactions to other metals or 14k gold.
Platinum as an Investment
The commodity bull market has led to an increase in the prices of all precious metals. Apart from its use in the manufacturing sectors platinum is also seen as a store of value and hence a hedge against the dollar and other paper assets. Over the last few years this has led to a significant increase in investment from private investors, mutual funds, pension funds and companies.
Platinum ETFs were introduced in London and Zurich in 2008 which have proved very popular amongst investors. [Editor's Note: Canada has the world's first and only open-ended mutual trust that invests in equal proportions of unencumbered, fully allocated gold, silver and platinum bullion.]
Platinum retail investment products have also been very popular over the last few years as the banking crisis showed the flaws in our financial system and it’s got to the point where it’s difficult to locate dealers with supplies of platinum coins that aren’t charging an extortionate premium over the spot price.
Platinum Mining
Mining for platinum is very capital intensive as it takes up to 10 tons of platinum ore to produce one ounce of pure platinum. Platinum ore deposits are very scarce and highly scattered. It usually occurs with five other metals which are also rare, expensive and chemically classified as noble metals. These are: iridium, osmium, palladium, rhodium & ruthenium. It’s also found as compounds with arsenic and sulphur.
Over half of the world’s historic production of platinum has come from one site in South Africa and the platinum has come from a thin layer of rock little more than 3′ thick.
With world demand steadily increasing and no new reserves being found this is one precious metal that should hold its ground in the future.
*http://www.oilprice.com/article-platinum-golds-big-brother-uncovered.html
Editor’s Note:
- The above article consists of reformatted edited excerpts from the original for the sake of brevity, clarity and to ensure a fast and easy read. The author’s views and conclusions are unaltered.
- Permission to reprint in whole or in part is gladly granted, provided full credit is given.
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