Bitcoin No. 10, "The Ringer" And Provident Metals

A nice series of events has come together lately to provide some information that I hope is of use or interest to you dear readers.

I continue to dabble in Bitcoin, even with its price volatility.  Just today (Weds., 12 Nov) it has spiked majestically, up some $60 (or 16%)!  I was lucky to buy some BTC over the past 10 days or so while the price was in the $300s (so, yes, I "BTFD").

I bought an interesting new product from Fisch Instruments ("The Ringer"), a device which allows you to "ring" a gold coin (or silver or platinum) to check to see if it is counterfeit.  The Ringer will be discussed below.

Also discussed below (after The Ringer) is my buying experience with Provident Metals, which is one of at least four precious metals suppliers who accept Bitcoin as payment.

*  *  *

I have now gained some experience in a limited amount of the Realm of Bitcoinistan.  Almsot all of this I have written about in my various pieces in the "Fun with Bitcoin for Beginners" series I started late in 2013 as I was learning.  Recently I have continued buying, mixing and now spending BTC (spending for just the second time).

It is hard for me to find actual PEOPLE to buy BTC from in my area, so I have found that the service that works the best for me is trucoin.com, who now will sell BTC by credit (or debit) cards in some 22 states.

Once I have the new BTC, I like to "mix" (aka "tumble" or "launder") them through two different services, in sequence if possible.  These are the same two I have written about before:

bitmixer.io

and

sharedcoin.com

So now I typically buy some BTC through trucoin, then mix them through (first) bitmixer and then through sharedcoin.  I believe the latter service is only offered through wallets used with blockchain.info's wallet service.  (blockchain.info is perhaps the premier monitoring service of the vital BlockChain infrastructure of Bitcoinistan, I strongly encourage everyone to tour their interesting website)

So, Step One (for me) is buying the BTC from trucoin (the only real drawback is that you do not have the privacy offered if you are able to buy from a person that you meet).  Once the incoming BTC are "confirmed (typically 8 - 15 minutes, but can be as long as 12 hours...), I then will send them (Step Two) on to bitmixer at the first opportunity.  Their service takes anywhere from 20 minutes - 12 hours, depending on confirmation times (I do not know why sometimes it takes so long to get transactions confirmed).  Once the BTC arrived "mixed" from bitmixer (and confirmed), I then run them through sharedcoin (Step Three), doing the pair of transactions bitmixer first and sharedcoin second means that I am likely to have less "taint" after multiple transactions...  Less taint (and running the BTC through two different mixers with different algorithms) also means that very few hackers *as best I can tell) would be able to follow my BTC trail.  Privacy.  It's one of the things that Bitcoin is all about...

Simple, right?  Steps One, Two and Three.  Well, OK, I have a system down with which I am reasonably familiar, but there can be snags...  The Bitcoin Ecosystem is a little clunky (like the Internet was in 1994, say, or PCs when they used early versions of DOS...).  Clunky and (alas) somewhat error-prone.

I have had three "incidents" (problems) come up in the past three weeks or so. All three were resolved OK, I lost nothing, but my BTC did seem to be in peril.  I will mention a bit on each incident, how it was resolved and how you can try to prevent similar from happening.  OK, but, the very nature of the infrastructure of Bitcoinistan now is that these kinds of things are likely to happen.

1. My problem with trucoin arose because I had a new debit issued (with a new expiration date, of course) which did not match the one in trucoin's system.  Updating and untangling this took part of a day, but I was not in a real hurry.  Their team solved the problem pretty quickly and amiably.  Bravo!  Apparently (a guess) my situation was that a debit card change was not programmed into their software, they actually thanked me for helping to improve their service.
2. I also had a problem with sharedcoin, although this was several weeks ago.  There was a glitch that happened right during the mixing process, I never got my BTC, yet they were sent (left my wallet).  Yikes!  I got through to their Help Desk, where the man suggested I try to recover the "intermediary wallets" (part of their mixing system).  And I was able to recover them.  Whew!  But, I learned an angle, so on balance the experience was worth it.
3. The other day I had my problem with bitmixer.  I am not sure exactly what happened, but the mixing process was taking very long, uncharacteristically so.  The transactions I sent them were possibly confusing as well.  It took a fair amount of back & forth with them to recover my BTC, my guess is that it was an involved process because they wanted to be sure that I was not scamming them and that they would be sure that the errant BTC actually DID belong to me, and that they needed to be SURE.  I am going to guess that there is a lot of scamming going on in Bitcoinistan, the fact that BTC transactions cannot be "undone" makes it attractive for cyberthieves to try taking away money...

I learned three general rules that may help:

--  Follow instructions carefully!  <== Very important!  Document your actions.
--  Work in a calm and considered way with the service provider, with all info possible
--  Be patient, some problems work themselves out on their own (confirmations)

*  *  *

In my travels around the Internet, I found out that Fisch instruments (the makers of the fairly well known, well known among people who collect gold coins anyway, Fisch balances to detect counterfeit precious metal coins) also came out with a new product called "The Ringer".

The Ringer is a plastic device that holds a coin in its jaw and that has a plastic hammer that strikes the coin to produce a characteristic "ring".  Most metals (in coin form) will ring at least a little bit (but not post-1982 pennies (zinc), lead "coins" or, importantly, tungsten).  Here is a photo of The Ringer (black plastic near the back) with a page from their notebook (showing pictures of coins on the right) as well as my recently arrived platinum coin (a Platinum Eagle (USA) from Provident Metals (center-left):

The Ringer, page from Fisch (right) and Platinum Eagle from Provident

All coins will have a distinctive ring.  The exact sound-signature of the ring depends on the metal (or alloy), the exact shape of the coin, and its size.  A fairly easy way to learn about different rings of coins is to get a modern (1965 and later) quarter and a silver quarter (1964 and earlier, you know, when those coins were made with silver), and drop one of each onto a hard surface (a granite countertop or bathroom tiling both work fine).  The silver quarter has a ring that is very distinctive vs the modern "clad" quarters.

The Ringer is precision-made to test the ring of coins, it works best on 1 oz coins, but will work on smaller ones as well.  I have not yet tested The Ringer on smaller coins, but I did test them on a few 1 oz precious metals coins I have in my own collection.  Here is a photo of my recently arrived platinum coin mounted in the jaw of The Ringer, ready to be tested:

The plastic hammer is not shown distinctly here, but is just below the left edge of the coin.

The Ringer is best used with a pen (or screwdriver in my case) to bend the hammer down so it will snap up and strike the left edge of the coin:

When the hammer strikes the coin, the coin will have a distinctive ring that is somewhat different than any other different coin.  In the case of a Platinum Eagle, it rings, but the ring is subdued and goes away in less than one second.  Here are some other "quick & dirty" results from my coin testing two nights ago (all 1 oz coins):

--  Platinum Maple (Canada), a dull ring similar to the Pt Eagle tested above
--  Palladium Maple, a nice ring, somewhat high tone, went on for several seconds
--  Silver Eagle, a decent ring, lasted several seconds
--  Gold Eagle, a very nice ring, went on and on (like a Chateau Latour...), beautiful!
--  Gold Buffalo (USA), a dull ring
--  Gold Kangaroo (Australia), another dull ring

I am very satisfied with The Ringer and will likely buy another.  And probably one of their balancesa as well (to test weight and dimensions of Gold Eagles).  The Ringer cost me $104.00 (delivered), it took a bit over a week to arrive from when I mailed my check.

See more (including an audio as well as a video) at their website: thefisch.com.

*  *  *

I was also very satisfied with my just arrived Pt Eagle from Provident Metals.  I bought the 2014 piece, which I have not seen (yet) at the coin shops I have been to.

The US Mint only re-started minting them after a pause of about six or seven years.  {latinum Eagles are kind-of hard to find!  For me anyway.  Also the price that Provident offers them at is at least $50 less than the coin shops (if the latter had them).

I received the coin in three business days after ordering.

I also paid with Bitcoin!  This was the second purchase I have made with Bitcoin (I bought a 0.25 oz Gold Eagle late last year).  They do want 1% more for BTC payment (vs. a wire transfer or check), but that is not much for the convenience and speed of paying by BTC.

Provident has a wonderful selection of precious metal coins!  Here is a link to their 2014 Platinum Eagle:

http://www.providentmetals.com/2014-1-oz-american-platinum-eagle.html

Provident has some kind of relationship with Elemetal LLC, my guess is that Elemetal owns Provident, but I am not sure of that, they do, at a minimum, have a special relationship.  See the very interesting website of Elemetal LLC:

http://www.elemetal.com/

Elemetal is a prime advertiser in American Hard Assets, the magazine I review on occasion.  I mentioned a while back that I was eventually going to try to learn more about Elemetal, as it seems to be very large (it owns Ohio Precious Metals, the largest gold refiner in the USA for example).

Watch this space, then...

Collecting The Heaviest Metals: Re, Os, Ir and Pt

I am indebted to Zero Hedge member "Silver Rhino" who first presented to me the idea of collecting very heaviest of the elements, the four metals rhenium (Re), osmium (Os), iridium (Ir) and platinum (Pt).  In particular, he suggested these might be "collectible" as they would be very hard to counterfeit because of their density.   Counterfeiting precious metals is becoming more of an issue as those who are doing it are getting better at it...  There have been various reports, at least some of them true, of gold being counterfeited by tungsten.

All four of these are the densest (highest "specific gravity") materials found (not counting the radioactive elements).  All but Re are "Platinum Group" metals, all four share pretty similar chemical characteristics.  Here is a quick look at the densities and prices of these four metals:

	Atomic	Density	Price
Metal	Number	(gm / cc)	($ / toz)
Rhenium	75	21.02	$110
Osmium	76	22.59	$400
Iridium	77	22.56	$710
Platinum	78	21.45	$1,450

Notes:

1)  Rhenium is available by the kilo, and has large price differences depending on form.
2)  Iridium has large price differences depending on form.
3)  Platinum price is as of today.

I would like to note that the above are heavier by a pretty good margin versus other metals, I believe gold is next at 19.30 gm / cc and tungsten at 19.25 gm / cc.  Depleted uranium (U-238) weighs in at about 19.05 gm / cc, but is radioactive (and so could be easily detected with Geiger counters and other detection equipment).

Platinum would be about 8% heavier than tungsten or depleted uranium, a good caliper and scale would be sufficient to tell Pt from W or U.

Rhenium is not a "Platinum Group" metal, but does lie adjacent to osmium on the Periodic Chart, and it also is rare, expensive and sought after (by some industrial users).

The other "Platinum Group" metals (palladium, rhodium and ruthenium) are considerably less dense (around 12 gm / cc, relatively close to silver and lead), and so are not examined in this article.

Each of these metals are discussed in nice articles at wikipedia.org.  ALL of the chemical elements are discussed there in separate articles, and wiki is the place to start for further research.

* * *

Platinum, of course, is by far the most familiar of these four heaviest metals.  A number of nations make Pt bullion coins (including the US Mint, which started making the Platinum Eagles again in 2014 due to investor interest).  Although Pt coins are not as popular as gold and silver ones, they can be found at larger coin shops.  Platinum would be the "third" precious metal for small investors interested in this kind of hard assets.  The price spreads are not too high for platinum, meaning that they are relatively easy to buy and sell, particularly the Platinum Eagle (here in the USA).  The Pt Eagles do however, command a premium (perhaps $100 per 1 oz coin) over other coins, but you would "get that premium back" upon selling (similar to buying and selling Silver Eagles here in America).

Of the four metals examined in this article, platinum would definitely be the one to start with if you own none of them yet.  Platinum is reasonably familiar to those who deal in precious metals, the price, while expensive, would not differ substantially from "wholesale" prices (which are a problem with the other three metals, as discussed below).

Platinum is used in catalysts (both car engine catalytic converters as well as in chemical & refineries) and is used in jewelry (diamond mountings in rings and even as platinum jewelry itself -- particularly in China).  While used in jewelry, many jewelers (small ones, say) find platinum to be hard to work with, as it is hard and has a high melting point vs. gold and silver.  But, silver is too weak to be used in mounting expensive diamonds.

Platinum was even used as a genuine circulating currency (in Russia in the 1800s for a while), in the unusual denominations of three, six and 12 rubles.  Here is a picture of a Russian Three Ruble coin from 1828 (image from coinshome.net):

These Russian coins are extremely rare, one of my friends sent me an eBay link a year or so ago offering a six ruble coin for $19,000...  These platinum coins, of course, are for numismatists and other specialized coin collectors.

* * *

Osmium I have covered before, I bought a 1 troy ounce pellet (blob) from elementsales.com some time ago.  Os is said to have a blueish tint, and mine does, see the photo:

That little tiny blob weighs 1 troy ounce (about 31 gm).

Osmium is very hard and the densest (stable) material in the universe!  So, one would think that it would be a "must have" for everyone interested in materials.  Yes, well, OK it is kind-of cool, but Os reacts (slightly in blob form, much more so in powder form) to form TOXIC osmium tetroxide...  So, even though it is so rare, heavy and hard, well, I do not think it is a good "investment".  Apparently only some 2000 ounces are used in the USA each year, and the USGS (last I heard) does not even track its production.

* * *

Iridium is just barely behind osmium in density, hardness and rarity.  But, iridium has more industrial applications.  Like the other Platinum Group metals, it is used as a catalyst and is used in more applications than osmium.  Iridium apparently has a slight yellow tint (as osmium has a slight blue one).

Wikipedia's article mentions that iridium is used as a source of antiprotons (a form of antimatter).

Iridium, you may also recall, is the metal found in over 100 outcrops all over the world that marks the "K-T Boundary" (now officially called the Cretaceous-Paleogene Boundary), it is thought that this layer is remains of a meteorite that hit the Yucatan some 65,000,000 years ago, killing off the dinosaurs.  Iridium is much more common in meteorites than in rocks from the earth's crust.

Iridium powder (similar to what I recently bought) apparently is used to make the darkest black colorant in adding color to porcelains.

I was told by my iridium vendor (http://preciousmetalpurchase.com/metals/iridium/) that powder is the most usual way iridium is sold to (and used by) industry.  This source of iridium offered the one ounce to me for $709, where elementsales.com wants $980 plus shipping).  On the other hand, I have dark gray / black powder vs. a cool looking pellet.

Iridium is much less toxic than osmium, but as a powder it can react and burn in air (like so many other powders).

http://www.rwmmint.com/products/iridium has cut its price of 1 oz of iridium (to $1495 for their 1 toz ingot, I have their picture from my recent article: http://robertmixblog.blogspot.com/2014/08/50-bills-iridium-bitcoin-app-for-iphone.html.  That is still more than what I want to pay though...

* * *

Rhenium is available from http://www.rwmmint.com/products/rhenium for $269 per toz, here is their picture of their ingot:

I believe that investors may be able to get a better deal on rhenium from Lipmann Walton and Co., Ltd. (of the UK), I am waiting on price and/or availability (they might only quote by the kilo however), their website is very interesting to anyone likes chemistry or materials science: http://www.lipmann.co.uk/metals-traded/.  Lipmann Walton buys rhenium from places like Kazakhstan, and then sends it off to metals refiner Heraeus of Germany to make it at least 99.9% pure.

A price I just saw (I do not know how current) is about an average of $3500 per kg (not toz), or some $105 - $110 in round numbers per toz: http://www.metalprices.com/metal/rhenium/rhenium-metal-99-9-na

Rhenium has one very interesting application that any prospective investors might want to know about: it is used in current "superalloy" third generation (newest jet engines, like used in the Boeing 787 "Dreamliner" or the engines in the new US F-35 jet fighter) jet engine turbine-blades.  Rhenium superalloy provides better performance at some 50 degrees C than current alloys.  And there are no substitutes, an engine maker wants higher performing engines, they MUST use up to 6% rhenium.  For each turbine blade...

See the below cool picture from wikipedia's article on rhenium (this is Pratt & Whitney's F-100 engine):

Rhenium is extremely rare, platinum is 10 times more common.  Only about 50 metric tons (50,000 kg) are produced each year.  It is typically produced from molybdenum residues, it is a "by-product of a by-product" (from copper mines, especially Chile).

Apparently rhenium is of low toxicity.

* * *

OK, so all four of these "heaviest metals" are sufficiently dense vs. tungsten (or uranium) to be detected relatively easily.  So, if you have money left over from buying gold and silver, here would be my suggestions on investing in this "micro-sector":

1)  The obvious place to start would be platinum.  Platinum coins are produced by a number of mints, and are not really all that scarce.  Platinum is useful to industry (where gold has relatively minor applications).  Platinum is fairly easily recognized, and is liquid (an important consideration if you must sell it).

2)  IMO, if you could get it a good price, rhenium looks to be a pretty good "speculation in physical metal".  I really like that non-substitutable nature of its use in jet engine turbine blades, that bodes well for the demand of this metal going into the future.  If the future is going to be good (like we all hope, yet worry that it may not be), then rhenium looks promising.

3)  In third place is iridium.  This is easier to get than osmium, is not toxic, and has more applications.  I have not completed my research into iridium.  Perhaps by buying in large lots (say 100 toz or more), the prices might be more reasonable.

4)  Osmium, alas, is really only for hobbyists or if you "just want it" (and there are plenty of people who "want" stuff like that).  Osmium does have the bragging rights as to being the earth's scarcest metal and the densest.  Too bad it is toxic.  But, what do you want for only $400 (or so) per ounce?

Review Of American Hard Assets -- Issue No. 6

Now that we are free from traveling (again) and free of entertaining visitors, I have no excuses (not even the Bitcoin frenzy is a valid excuse)..., it's back to work!

American Hard Assets ("AHA" from here, this newest issue (reviewed now), comes out every other month) is focused on coins, precious metals coins of course.  Five US coins (Au, Pt and Ag) are about half of the front cover.  Gold coin sellers APMEX and Provident Metals have prominent ads featuring pictures of gold & silver coins.

Managing Editor Ryan Kasmiersky introduces the articles in this issue with a couple of comments each.  Of particular note is the whole issue of buying gold coins for bullion value alone (what I do, US Eagles) or for numismatic (coin collector scarcity value) too.  This is an important question for prospective gold coin collectors, I know people in both camps.  The US $5.00 gold coins, for example, are a beautiful coin (actually at least three designs), and can be bought in many years and many conditions (how worn they are for example).

Coin collecting (numismatics) has a long and honored history here in the USA.  When I was a kid I collected pennies, nickles and dimes in the Whitman coin books.  My father had collected coins when he was very young, and I believe that he still has much of his coin collection.  Being familiar with US coins almost makes you familiar with our history.

***

In the "World News Update" section there is an short article on a $4.00 (four) US gold coin that went for $2.5 million at a recent auction, only some 15 or fewer were ever made.  Another (interesting!) short piece mentions that platinum has seen strong growth in India because of India's recent restrictions (a near-ban actually) on imports of gold.  The third article describes record numbers of orders of silver from the US and Canadian Mints.  The other two articles are on China overtaking India as No. 1 gold buyer (remember, this magazine comes out every two months) and news of a $1.6 million heist of gold bars stolen from an Air France flight.

***

Mike Woodcock authors up the first detailed article, this one on the Gold/Silver Ratio.  I have seen a number of comments in various places on playing (trading off of) the Au:Ag ratio. The current ration is roughly 64: 1 (64 oz of silver to get 1 oz of gold, in dollars).  A lot of comments I have seen for YEARS have suggested that the ratio "ought to" follow the approximately 15:1 ratio that would represent how scarce the two metals are to each other in the Earth's crust (about 15 times as much silver).  I have seen references ("tmosley" at Zero Hedge) that in ancient times the ration was 1:1!  And it has been as high as 100:1.

Woodcock mentions that there is some seasonality in gold and silver pricing (gold tends to be relatively high around the Winter holidays for example, while near bottoms in August or so).  But, he careful to mention (correctly) that volatility and investor sentiment often far outweigh short-term seasonal effects.

He then goes on to mention two strategies that traders can undertake to buy the "cheaper" metal vs. selling the more "expensive".  I do not have the experience or capacity to judge these strategies, as I just buy and hold...

***

Mark O'Byrne writes a great article on how and why some bullion coins have higher premiums (premia for you sticklers) than others.

But first let me introduce him, I have seen his name before, but never put it into place here at these AHA reviews.  Mr. O'Byrne runs GoldCore, you can see his contributed pieces at zerohedge.com (almost daily) as well as at 24hgold.com (where I get a lot of my gold information).

There are various reasons why premiums vary:

-- size of coin (1/10th oz coins have higher premiums)
-- special situations ("Y2K" caused very high premiums on US silver vs. Canadian)
-- changes in demand (Krugerrands became less popular in the US when Eagles came online)
-- perceived liquidity issues (I buy American Eagles because I see them as more liquid)

An excellent article, highly recommended.

***

Numistatist Fred Reed writes a great article ("Coins & Inheritances") on what to do if you (or, say, a loved one) inherit a coin collection...

Apparently something still happens here in America that I thought might have died out: that people sometimes sell their inherited coins at far under their value!  This can result in receiving (say) just 10% of what those coins might be worth!

To get maximum value for inherited coin collections, one must either do the work to learn their value (that can be difficult and a lot of work if you do not enjoy it) or have a professional (maybe two or even three) come by and carefully value the collection.

***

"The Bullion Baron" writes about the new Lunar Horse Coins, these will be various (but a lot of Canadian and Australian) gold and silver coins to be released soon (although some are out now) to celebrate the Chinese "Year of the Horse".  The Baron also wrote last year's article on similar coins for 2013 the "Year of the Snake".  Some of these are "legal tender" proofs (struck by PAMP of Switzerland), and most of these commemorative coins will sell at very high premiums to their metal value.

Other mints (Singapore, China, and New Zealand) are joining the fun (I would so guess that Chinese collectors are among the major buyers, but The Baron mentions that there is a lively trade on eBay Germany as well).  The pictures he provides of various of these coins are magnificent.  But, the premiums for almost all of these are very high.

I think I am beginning to see that there are three types of bullion coin collectors...  "Bullion nada mas" (like me), collectibles collectors (like those who collect US pre-1933 gold coins) and now collectors of premium & dazzling bullion coins that The Baron describes so well.  Collectors of Proof bullion coins and similar would fall into the category as well, IMO.

***

Author Louis Golino writes "Collecting vs Investing in Modern World Coins".  He touches on some of the same themes as The Bullion Baron in regards to bullion value, beauty of the coin, and scarcity...

But, Golino's article is about ALL world coins as candidates for collection and for the possibility of making money.  He cautions that trying to make money bu buying modern world coins is not easy.  There are a LOT to choose from.

He includes pictures of unusual silver coins put out by private mints as well.

An interesting article, but I just want the (US) bullion...

***

Michael Haynes, CEO of APMEX (a major seller of precious metal coins and bars, his company did the famous deal with Donald Trump of paying their first month's rent (IIRC) in one of Trump's NYC buildings for 3 one kilo gold bars; also, I personally know someone who is a very happy customer of APMEX) writes about the "Other One Ounce" gold coins: Twenty Dollar Gold coins (pre-1933), titled "How to Find Gold With an Extra Measure of Demand".

There are two major variations of the Twenty Dollar Gold piece: the "Liberty Head" design (1850 - 1907) and the "Saint-Gaudens" design (named after the sculptor who designed it, 1907 - 1933).

Both of these types are in very high demand by high-end coin collectors.  There were about 174,000,000 (total) of these coins struck by our mints.  Each "Gold Double Eagle" (the popular term in the coin community for these) are 90% gold and 10% copper with a total gold weight of 0.9675 troy ounces, so they contain almost one full ounce of gold.  When gold backed our money, the official (fixed) price of gold was $20.75 per oz, so the 0.9675 oz coin was worth $20.00.  How quaint!  (smile)

In 1933, FDR confiscated our gold, many (but the exact figures are NOT KNOWN) of these and other US gold coins were taken and then melted down into 90% pure gold bars (reflecting the coins, so they were NOT further refined) and are reportedly (and probably) stored at Ft. Knox in Kentucky.

Mr. Haynes mentions an "extra measure of demand" in that many collectors want an example of ALL mintages, and that even some of the common dates (almost interchangeable in price with each other, fairly low in many cases -- relatively speaking!).

But, his major contribution to our knowledge (to those of us who are not experts) is that there are TWO major factors in individual prices of Gold Double Eagles:

-- Current condition (how imperfect the coin is)

and

-- Scarcity of each coin by year and mint

[Ed. Comment: You had better know what you are doing in collecting these or have someone advising you that you really trust!]

He then goes on to analyze different coins and conditions which seem to offer more upside (in other words, they seem to be attractive values at current prices).  He goes into a lot of detail, having clearly done his homework for this article.  But, I will offer up his punch-line now (his two recommendations):

BUY common date (any) $20 Liberty Head Gold Double Eagles in MS61 condition.
BUY common date (any) $20 Saint-Gaudens Gold Double Eagles in MS 62 or MS 64.

***

Jonathan Kosares (USAGold) nicely complimemts Mr. Haynes' article by discussing grading the $20 US gold coins ("Understanding the Graded U.S. $20 Gold Piece Market").

The major point of his article (also well-researched) is that the premiums of $20 gold pieces rise and fall depending on things (especially under systemic  financial stress...).  He uses and index of five $20 gold coins in his study to smooth out variations in prices/demand for any one coin, although all five coins are in MS63 - MS65 condition.

An important conclusion he draws is that premiums (over spot gold price) are now near all-time lows...

But, I repeat my Editor's Comment from above: you better know what you are doing or have a trusted adviser...

***

The pawn shop business is something I know next to nothing about (although a friend of a friend is in the business and I will have to talk sometime with him).

"Beverly Loan Company Q & A" is interview with Jordan Tabach-Bank (third generation owner/operator of two high-end pawnshops, one in NYC the other in Beverly Hills).  By"high-end" I mean people who come in with $25,000 Patek-Phillippe watches or $90,000 diamond rings...  They opened their NYC location because of demand, and they chose to be in the famous "Diamond District" (47th St. between Fifth and Sixth Avenues).

The bulk of the items they pawn are jewelry, watches and diamonds, but they do loan out against sports memorabilia, artwork (inc. contemporary) and other items of high value.

Tabach-Bank mentions that his business, like more run-of-the-mill pawnshops does well in all types of economies, including in recessions...

***

Well, well, well.  The wholesale gold market had an interesting change.  Elemetal Capital (apparently privately owned) is the parent company of NTR Metals as well as Ohio Precious Metals ("OPM").  But, they will NOT sell their OPM 1 kg gold bars to the public...  In case you wanted to know.

elemetalcapital.com

***

Moving on to articles for the Very Rich, Nicolle Monico writes about wine tours of Europe, especially more unusual ones (wine-blending class in the Médoc, Spanish vineyards by horseback, etc.).

"Million Dollar Listing" writes about America's most expensive residential real-estate markets.  California, New York, Connecticut and Hawaii.

***

Watch expert Ed Estlow writes "The State of the American Watch Industry".  America's watch makers lost their way in the 1970s or so, either went under or were bought up by foreigners.  But. there are some watch makers (high-end) who make watches (but with imported parts!!!) now...  Brands include Shinola (!, and made in Detroit of all places), Towson, Montana, Bozeman (two from Montana?), Sedona, RGM and Kobold.

***

Dan Denning (who used to, maybe still does, write for Agora / Daily Reckoning) writes and article about how gold fits into all sorts of plots of James Bond movies, Vietnam, Nixon, etc.  Looks like Nixon making our gold non-convertible in 1971 reverberated more than I noticed back then (of course I was 15 years old then...).

***

Gabriel Benson writes "Baseball Cards: Childhood Dreams can be a Strong Investment".  Baseball cards?  Yes, there is a demand for "slabbed" baseball cards: a high quality Honus Wagner (Pittsburgh Pirates) is worth some $2,800,000...    I guess there is always something you can buy if you are too rich.

***

Short special interest articles include "To Clean or Not to Clean" (artwork, generally speaking no, let the experts do it), "war nickels" (1943, when they used some silver in then that year), and "The Four D's of Selling (Death, Debt, Divorce and Desire).

***

The Mining News section contained an important item I had missed: Anglo-American has given up on its efforts to develop the apparently very large prospective Pebble Mine in Alaska.  Gold has continued to drift lower in the past few weeks, so my guess would be that it will be a LONG time before this one ever starts producing.  Environmental groups (etc., "the usual suspects") were an important factor in stopping the project.

Also in Mining News are short articles on Newcrest and Glencore Xstrata both taking a beating on lower gold prices.  Another article mentions Barrick (a company with never-ending problems it seems) selling Australian Mines to Gold Fields.

But, the interesting gem for me in Mining News was the article describing how Ontario has ruled against Cliffs Natural Resources project to build a road into Ontario's "Ring of Fire" (a set of old geological formations thought to contain huge amounts of valuable minerals, including gold, but very remote...) to exploit a chromite project..  I had earlier read that Ontario had as a priority to develop the Ring of Fire area because it would provide jobs, etc.  Well, I guess not.  Again, the locals did not want it after all...

[Ed. Comment: I sure am starting to see almost universal revulsion by locals re new mines in their backyards..., I think FOFOA is right, buy the METALS not the MINERS]

***

"Last Word" is the name for John Garibald's editorial, this edition is about Obama's choice of Fed Chairman.  He wrote it before Obama chose Janet Yellen.  Garibald showed his approval of Yellen, and he further hopes that the Fed will maintain us on the QE drug we crave, that she not cut us off too soon (almost his exact words, my edit to be a bit shorter).

Well, I don't know...  My inclination has always been to "take our medicine" as soon as possible, and (we hope) the financial markets would recover relatively quickly vs. the QE-to-Infinity camp of keeping us on QE ever-longer (risking a bigger catastrophe later).

Maybe it's just as well that I am not in charge of anything now...  Janet Yellen may go down as the fall-gal when this all blows up...

***

Conclusion:

Yes, if these subjects interest you, particularly if you are thinking of COLLECTING items of value or want more insights into gold coins, then buy this magazine.

(Disclosure: I received a one year subscription from them, this is the last free issue by my count...)

Relative Value -- Part One

Over the past week or so I have been busy, but I have been thinking about a few subjects that could mostly be lumped together as a topic I call "Relative Value".  After some brief comments on our bearings (very valuable), I will examine relative values of the precious metals with each other.  I will look at other items of "relative value" in the near future, so this is the start of a short series of related articles.

Certainly for me, rolling bearings that we sell in Peru are of great value, it is our principal way of adding value to our world, and hence making money for doing so.  We add value to Peru's automotive spare parts market, our customer pay us for the pieces rather than paying our competitors.

Just today (Saturday) our Collections Director Raul told me that our sales of Chinese bearings and hub & bearing assemblies are still strong.  And we have Korean bearings that will arrive later in August that will help sales a lot as well, including our best selling piece (the 6007-RS for Daewoo Tico).

So for us, objects made of  "52100 steel" (bearing steel) are precious, metal products of high relative value to us..., practically precious!  But, in our case, steel bearings are actually producing an income (precious metals just sit there), a stream of wealth, and that surely has value...  Not the same kind of value as gold, not even really "relative to gold", our bearings (and bearing business) represent more a different class of value.

***

And of course, physical precious metals have a very high relative value compared to almost anything else.  The below picture is in honor of two people I do not even know, but it is a celebration (a 50th Anniversary!).

"Little Gold"

The photo shows US 1/4 oz and 1/10 oz Gold Eagles on the left, a 1/4 oz Krugerrand in the center and 1/4 oz and 1/10 oz Canadian Maples on the right.  My picture is not perfect, but you may be able to notice color differences between some of the coins (the angle of my photo influence the colors as well).  The Krugerrand in the middle shows a slightly rose color because the K-rand is 91.67% gold, the balance is copper, the copper making it slightly more pinkish than the others.  The American coins are also 91.67% gold, but the coins are alloyed with 3% silver (balance is copper), so the coins are not as reddish as the K-rand.  The Canadian gold on the right is all 99.9% percent gold, and is also polished up more finely than the American, and so has a brighter more clearly "gold-shine", although that is not obvious in the picture.

For me, "Little Gold" (small gold coins) have a value that is beyond their actual bullion value of, say, 1/10 oz in their smaller size.  The smaller sizes, of course, sell at a higher premium as the costs of minting them are relatively higher.  Smaller sizes have real value to me, they would be good for smaller transactions if it ever comes down to having to part with my gold...  Why would smaller gold pieces (1/10 oz) have value to me?  Because their value is approximately the "geometric mean" between the 1 oz Silver Eagle and the 1 oz Gold Eagle, meaning that the value of a 1/10 oz gold coin is "halfway between" the other two...:

(ln($23.25) equals about 3.1, ln($138) equals about 4.9 and ln($1375) equals about 7.2)

And the concept of "Relative Value" here?  Since I already have 1 oz coins, the relative value, to me, of 4 pieces of 1/4 oz coins is a little higher!  Much more flexible in making purchases (should it come to that) or for gifts (hah!  Don't hold your breaths...).

Would it ever become hard to sell gold?  No, I think not.  "There is always someone around who will accept your gold."

***

A topic that recently  has gotten even more attention than it normally does is the relative value of gold vs. silver.  This is most often looked at by the Gold-to-Silver Ratio (Au:Ag or "GSR").  The GSR is used by many traders of precious metals to try to identify which is overvalued (or undervalued) among the two.

Through history, the GSR has been relatively stable (more so than in the charts below).  Typically the GSR has mostly been in the range of 12:1 or 16:1.  This probably reflects the relative mine-able abundance of gold and silver in the earth's crust.  I have read, however, that in ancient history (Egypt) that the ratio was 1:1 (silver had the same price as gold!).

Here is a chart showing this ratio over recent months (as always, *click* on any image for a better view).  Please also note that all of these charts are for "paper gold", I would bet that once you (well, maybe not YOU, but me neither...) are at the level of trading for say, 100 metric tones of gold, that you would pay far, far more...  But these charts do give a fair representation of the relative values of the precious metals at present.

The chart has been very spiky over the last months, most notably during the time of the gold & silver price crashes in April and in June (and of course now in August).  I would attribute the decline in the GSR in August (so far) to the recent outperformance of the price of silver.  Gold has gone up to be sure, but silver has gone up faster.

This next chart shows the same GSR, but for almost three years:

There are a LOT of interesting things to note in the chart just above.  First would be the remarkable nine month or so plunge in the GSR from late 2010 to May, 2011.  This was when the price of silver shot to almost $50.  Of interest to me is that during April of 2011 was when I did my only "trade" of precious metals, I turned in a bunch of silver for a much smaller amount of gold.  On the day I traded it in, the GSR was about 36:1, so I was lucky...

Silver is notorious for being volatile, for that it is sometimes called "The Devil's Metal"...

That same chart shows the GSR 200-week moving average to be pretty steady at around 58:1 or so over the past three years.  Does this 58:1 ratio represent a fair relative value between gold and silver?  My best guess is that yes, for the short-term it may very well (please note that my prediction record is poor, so I "guess" now...).

But, the more important question is what the future GSR ratio will likely be.  Is gold a better "relative value" than silver?  My "guess" is yes it is.  The line I have trotted out before is that FOFOA is likely to be right in the end, that gold, and only gold, will have its big revaluation because of a likely default in delivery among the very top holders of gold.  Similarly, the world's central banks hold gold alone of the precious metals.

I have also recently come to believe that silver has become mostly "demonetized" (demonized?).  By this I mean that silver is less looked at "as money" compared to the past.  Those of us old enough to remember US coinage from 1964 and earlier can remember when silver dimes and silver quarters were what we got as change back from a dollar!  This almost seems absurd now, even though the US Constitution mandated that our coinage be gold and silver (the bimetallic standard was arguably a mistake, but that is for another time...).  "They" were successful and did it: demonetized silver.  So even though silver is scarce (above ground stock of silver is less than the 15:1 or so historical average) AND that silver is the commodity that is used in more applications than any other (except oil), my bet is more on Au than Ag...

One other thing about silver being less than ideal in times of financial distress.  One of FOFOA's most serious followers lived through a hyperinflation.  He reports that at no time was silver a commonly bartered item.  People wanted cash!  But they wanted the cash fast, and then wanted to spend it fast!  I need to check back, but I believe that gold was often taken in barter, as I mentioned above, there is always someone around who will take your gold...  I will take gold for almost any payment...  ;)

Also, from a limited experience of my own with hyperinflation (as a visitor to Peru during a hyperinflation of theirs), in Peru in those days, I never saw silver being exchanged as a payment mechanism, neither by a buyer offering to pay in silver nor a seller asking for silver.  Even with a hyperinflating currency, Peruvians wanted CASH!

And so, at the risk of antagonizing fans of silver, I conclude that gold is a better relative value to me, in my circumstances and at this time.  Of course, I could be wrong, so I also own some silver.  The silver I now hold is really for a TEOTWAWKI.

And what would I "guess" will be a likely GSR ratio in the future?  200:1!

***

Since this article is about relative value of precious metals, I present two more charts showing more relative values.  This first one is Gold to Platinum (Au:Pt) from late 2010 through 2013 to date.  Through time, platinum has typically had a premium averaging around, say, 20% to gold.  Will that continue into the future?  Platinum is some 30 times rarer than gold, and has many more industrial uses...  Again, my "guess" is no...

Gold has been trending back down to its "normal" (historically normal) relative value of around 0.80 - 0.85 to the price of Pt.  Will Au: Pt ever go to, say, 20:1 (as more-or-less predicted by FOFOA)?  That is a harder for for me, but my guess is that gold will indeed outrun platinum by a considerable margin.  Why?  Pt shares two important characteristics with silver: it is not money (never really was monetized in the first place) and it is used in industry.  Could platinum have a huge reset?  Hey, anything is possible, especially considering how rare Pt is (and where it comes from: risky places like South Africa and Russia).

And palladium (platinum's little sister)?  Palladium has had an almost unbelievable volatile ride since just before the financial crash in 2008 (and so will not show in the chart below).  Pd rose to over $1000 per oz when Ford loaded up on it thinking that was to be their catalyst of choice (for their catalytic converters to reduce air pollution).  That is reported to have cost Ford some $2 billion...  This chart is again a weekly chart for the period of late 2010 - 2013.  Note how all three charts look a different!  I wonder how much of these different price movements represent "fundamentals" (mine supply, new applications) vs. traders' actions...

Palladium has had a very good run over the past several months, that is why the Au:Pd ratio has been declining.  Pd is an interesting metal (that I have discussed before), but it is almost all used in industry of one sort or another.  Some Pd is used in white gold, and some more is used in jewelry in China to replace platinum.

While I think that gold once again is the best choice for the longer-term, I can have no objection to diversifying into platinum or even palladium (but I would get gold and silver first, especially gold).

Diversification In Precious Metals

Long-time readers of my blog knew this one would eventually come...  While I still have not written a piece on Silver (I have long felt that I could draft someone else to do a "Guest Post" on silver...), I include a discussion here, as the dynamics of holding silver are different than holding gold.  And both platinum and palladium have their own dynamics as well.

I use the acronym "PMs" often in this article, short for "precious metals".

"Gold is the money of Kings
Silver is the money of Merchants (Gentlemen)
Copper (Barter) is the money of Peasants
Debt is the money of Slaves"

- "Traditional" (I did a quick Google search and could not find the origin of this saying, "Traditional" found here: http://corp.adjutant.com/about/favorite-quotes)


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An Extremely Brief History of Precious Metals Monetization in the USA

1)  The US Constitution says that money was to be ONLY silver and gold.

2)  They took away our gold in 1933 (Roosevelt's confiscation).

3)  They took away our silver in 1965 (clad dimes and quarters).

4)  They even took away our copper in 1982 (new pennies are mostly zinc).

5)  Will they take away our money in the banks soon (see Cyprus)?


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An interesting forum-style website covering ALL precious metals is pmbug:

http://www.pmbug.com/

Gold and silver are also much discussed at the famous Zero Hedge website (which talks about almost all things financial as well):

http://www.zerohedge.com/


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Gold

Gold has been considered the wealth-preserver of choice for some 6000 years.  Most gold is hoarded, relatively little of it circulates (even back in the days of gold coins as "money", gold did not circulate much).  Because of this primary role of wealth-preservation, gold's highest and best use is sitting very still, held through time, generation-to-generation.

(Re gold and the statement in blue above, I am a follower of FOFOA: fofoa.blogspot.com)

Indeed, gold traditionally HAS been the choice of kings as well as the choice of plunderers for millennia.  Most civilizations valued gold highly (one interesting case that did not were the Incas of South America, who made decorative plates (etc.) out of it, but it was not really hoarded by them, although it WAS called "Tears of the Sun" even by them).

On occasion, LARGE transactions were often transacted in gold.  There is a (an apocryphal?) claim that in Weimar Germany during their hyperinflation that ONE OUNCE of gold bought an apartment building...

Gold is available from 1 gram - 400 oz (troy) sizes.  It is relatively EASY to buy gold coins (Gold Eagles are my choice) in one oz size, but Eagles also come in smaller sizes too (1/2 oz, 1/4 oz and 1/10 oz coins).  Gold Eagles are almost always available at "the largest coin shop in town", the retails price is typically about 6% over spot (6% premium) for Eagles, for certain other gold coins (Krugerrands, Austrian Philharmonics, etc.), the premium is typically less.  LARGE bars of gold (1 kg (31.2 troy ounces) for example) are a little harder to get, especially the 400 oz bars (seen movies...) -- a 400 oz bar would run you some $640,000 now...  One kilo gold bars are typically available at www.tulving.com.  Here is a picture from tulving, showing a typical 1 kilo gold bar: http://www.tulving.com/bullion/kilo_gold_bars_johnson_matthey_jm_kilo_bar.htm

Gold is the only metal stored by the central banks as monetary reserves (most central banks also use US dollars and other currencies as part of their reserves as well).  The central banks and the central bankers may be evil, but they are not stupid...

In my opinion, gold is most suitable for:

-- the already wealthy looking to hold it as a "store of value"
-- those with a long-term horizon (family holdings, to be passed down the generations)
-- those who may want to trade it at some point for other high-valued items (land, fine art)
-- those who might want to transfer a large amount of wealth with them...

Gold is less suitable for:

-- those who cannot afford it (a 1/10th oz Eagle costs about $190, which is not that much)
-- those who plan to "spend it" (for food, etc.) in a SHTF
-- those who do not have children or other heirs they love...

As of the date I write this piece, gold's spot price is about $1605 per ounce.  The price of gold has been range-bound for over a year now, ranging from the mid-$1500s to $1900 per oz.


Silver

The famous economist Milton Friedman has written that silver has been used for money much more often throughout history than gold, indeed his assertion is correct if you define "money" as something that circulates (although the definition of "money" is very slippery, see FOFOA's (very long) blog pieces on money).

One reason why I have not written much about silver is the huge amount of conflicting information about the metal as well as how much the price is manipulated.  In my opinion, there is no question that the price of silver (and gold to a lesser degree, probably...) are manipulated, but how much...?

Silver, it turns out, has a myriad of industrial uses.  I have seen claims that silver is used in more  different industrial applications than any other metal (though usually in very small amounts).  Silver is used (50 lbs worth?) in every Tomahawk missile (and not recycled) as well as iPhones and iPads.  A lot of silver is recycled, but a lot is not.  The fact that a LOT of silver is used by various industries means that its price is influenced by the general economic climate.  "Moar stuff, moar silver is used"

I have seen claims that the amount of the world's above ground (tradeable) inventories of silver are about the same as for gold (about one billion oz each), a claim I cannot verify to my satisfaction (LH!  I need an article from you on silver!!!)

Here is some reading material for those interested in silver (I do not include much information about silver here at my blog, there IS extensive information on gold and platinum here):

http://lhmarketwatch.blogspot.com/

https://silverbulletsilvershield.com/

Silver is also easy to get (although Silver Eagles have been hard to get at certain times since 2008, the US Mint apparently cannot keep up with demand for silver from investors), typically in one ounce coins, there are MANY options, I choose Silver Eagles as they are made in the USA and so well-recognized.

Silver is most suitable for:

-- those who want to buy an ounce for less than $40...
-- spending in a SHTF, yes silver would be better than gold for that
-- those who are betting on silver "running out" (a common theme among silver bulls)
-- fabulous gifts that are not too expensive...
-- speculation..., there WILL be spectacular movements (up & down)
-- protection from germs ("a silver spoon...") and vampires...
-- jewelry (notice how hard it is to find GOLD jewelry nowadays?)

Silver is less suitable for:

-- holding in large quantity (this subjective, I know someone who has 5000 oz...)
-- those who prefer less price volatility...

Silver's price today is about $28.80.  Many consider this price grossly undervalued (a bargain).  The gold price to silver price (Au:Ag ratio) is about 55:1, relatively high by historical standards (this means that were the metals to revert back to their traditional 15:1 ratio often seen in history, that silver would outperform gold, although whether this will happen anytime soon is in much dispute...).

Interested in buying silver...?:  "DYOF Diligence"!


Platinum

Platinum has been recognized as a precious metal now for some 150 years or so (depends on who's counting...).  Platinum is used in diamond mounts (engagement rings, for example) as it is harder than silver or gold.

Platinum is much rarer than gold, there are approximately 10 ounces of gold for every ounce of platinum around the world.

Platinum is also used in industry (as catalysts and in alloys), and so is similar in that respect to silver.  The metal's price shows some of the same industrial demand dynamics as silver does.

Platinum is relatively more suitable for:

-- people who already have decent holdings of other PMs
-- people prepared to pay the price (roughly the price of gold per ounce)
-- those OK with price fluctuation (more volatile than gold)

If you do not have gold and silver, I would recommend starting with those two first.  But, if you are not the kind of person who takes advice from the likes of me, well, owning platinum is better than not owning any PMs at all.

Platinum is harder to get than gold and silver, but if you look around, it is there.  tulving (see above) has platinum coins.  But, not Platinum Eagles, which are VERY HARD to find now (except for "proof coins". which are collectible coins with a high premium over metal value).  Platinum from Canada, Australia and the UK is fairly easy to get.

Platinum is priced around $1580 per ounce, less than gold.  This is relatively rare, historically speaking, the ratio of Pt:Au typically varies from approximately 1:1 (now for example) to 1.3:1 (platinum more expensive).


Palladium

Palladium is the last of the PMs as accepted by most commentators...  Palladium (like gold, silver and platinum) are traded on the COMEX, and palladium is used for some jewelry (esp. in China and as one the accepted alloys for "white gold").  Palladium is also used in industry (like platinum), but in lesser amounts.

Palladium's price volatility is very high (it traded over $1000 / oz before crashing to under $200, wow did Ford Motors lose a LOT ($1 billion) on palladium when the Russians let 'em have it...).  Palladium is also even harder to get than platinum, but too can be found at tulving...

Palladium is now trading about $750 / oz.


Other metals (as investments) and comments

With Cyprus the being the "disaster du jour" lately, I have seen various comments on holding metals that are NOT PMs...

Perhaps the most common are people who are (and have been for over a year now) hoarding NICKELS (5 cent coins).  Nickels are 75% copper and 25% nickel.  The US Mint is likely to STOP making nickels very soon, as they cost some 10 cents to produce (transport of base metals is expensive...).  The metal value of nickels is around 4.9 cents now, lately it has been above and below 5 cents.  Metal value, of course, does not include the expenses of melting nickels to separate the two metals (now currently illegal).

Many people also are culling the copper pennies (1981 and before) pennies that are 95% copper from the modern (1982 on, although some 1982 pennies are copper...) pennies which are some 97% zinc with a copper coating...  The copper pennies are worth (metal value, although ZH-er DCFusor has informed us (at pmbug.com) that "penny alloy" is not considered desirable by recyclers of copper...  Also, is it really worthwhile to spend your time sorting PENNIES?!?!

Metal values of US coins can be checked at www.coinflation.com.


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The question probably will arise: "how much of each PM to hold?"  That, kind reader, is up to you!  In the above comments I have discussed suitability in a general sense.  In my own case, here is my $-value percentage holdings of the above PMs (values approximate):

Au:   78%
Ag:     3%    <--- lots of ounces (for "SHTF"), but my gold is worth far more
Pt:    18%    <--- I value platinum's "price density" (value per ounce)
Pd:     1%    <--- token speculative position only

The Mercenary Geologist Writes About Platinum

Mercenary Geologist.com has been kind enough to allow me to be a syndicator of Mickey Fulp's musings on metals and mining topics.  Your congenial host here was a Geology major in college, so these kinds of stories interest me.  Here, Mr. Fulp explores platinum and its price relationships to gold and palladium.

I recently have written an item or two about platinum, but the below piece is a much better perspective on platinum and palladium than I have been able to put together.

Depending on how well you readers accept this article, I may devote more energy to platinum and its related metals.

And now, Mickey Fulp's piece:



A New Price Paradigm for Platinum and Palladium

Platinum (Pt) and palladium (Pd) are the two most commonly used of the six platinum-group metals (aka platinoids), which also include rhodium, ruthenium, iridium, and osmium. As a group, these metals are rare in the Earth’s crust, silvery-white, malleable, and dense. They are highly resistant to wear, oxidation, and corrosion, have stable high-temperature and electrical characteristics, and exhibit catalytic properties.  The two metals are produced from primary mines and as byproducts from nickel and copper refining. They occur in unusual and specific geological environments in relatively few places on Earth. The largest deposits currently exploited are theBushveld of South Africa, Norilsk in Russian Siberia, Great Dyke of Zimbabwe, Sudbury, Ontario, and Stillwater, Montana. According to USGS estimates, 2012 platinum mine production was 179 tonnes and palladium was 200 tonnes, down 8% and 7% from respective 2011 levels. Recycling constituted about 29% of total supply. However compared to 2012 gold production of about 2800 tonnes, these are small markets supplied by a few big mines and companies.  South Africa dominated production at 74% with Russia at 13%. Remaining supplies came mostly from Zimbabwe, Canada, and the United States. Palladium mine production came from South Africa at 41% and Russia at 40%, followed by Canada, the United States, and Zimbabwe. As with many commodities, the United States is largely dependent on foreign supplies: 91% of our platinum and 54% of palladium consumption are imported. We consume nearly half of the world’s platinum and 30% of its palladium supplies. Because of their rarity and physical properties, platinum and palladium are considered precious metals and used in jewelry and investment coinage. However because demand is dominated by industrial applications, they are actually hybrid metals. Industrial use is overwhelmingly for chemical catalysts and dominated by exhaust systems for automobiles and trucks.  In 2011, platinum use stood at 38% for auto-catalysts, 31% for jewelry, and nearly 6% for ETF investments. Other important demand came from the glass, chemical, electronics, petroleum, and medical industries. Palladium use was dominated by auto-catalysts at 71%. The electronics industry consumed 16% and dental, chemicals, jewelry, and minor uses constituted the remainder. There was a significant net outflow from ETF investments in 2011. Because much of the world’s supplies come from geopolitically unstable, corrupt, and/or unfriendly countries and are dominated by a few major mines, districts, and companies, platinum and palladium are subject to supply and demand imbalances and price volatility:               Data Courtesy of Kitco.com Since the price of gold was floated on world markets in August 1971, the platinum to gold price ratio  (Pt : Au) has been greater than one (>1.0) about 85% of the time. Average monthly price ratios since 1970 are charted below: Ratio reversals (<1.0) occurred at various time periods lasting from over two years to a one month spike in December 1992 when the historic low was set at 0.78. The most recent reversal was from November 2011 thru mid-January of this year. Since 1970 the price ratio of platinum and palladium has varied generally between 2.0 and 5.0, largely reflecting palladium’s inherent price volatility compared to platinum:  Palladium price was fixed at the nominal price of gold ($35-36/oz) until mid-1972. From January 2000 to mid-2001, historic lows less than one (<1.0) occurred when rumors spread that Russia would cease stockpile sales to the West. Hoarding by American auto companies caused the price to briefly soar over $1000/oz. But then Russia’s balance of payments suffered, palladium was dumped on the market, and the price went parabolic. By July 2003, the metal reached a monthly average low of $162/oz. Ratio disruptions on the high side (>5.0) occurred in 1983-1984 and when auto industry demand collapsed during the global economic crisis in early 2009.  My interest perks whenever an anomalous Pt : Au ratio (< 1.0) occurs over a significant time span. This indicates that platinum is oversold and presents a buying opportunity. Such was the case beginning in November 2011; only recently has the ratio gone back over 1.0.  Several factors have caused platinum and palladium prices to rise substantially since early August:  · In 2012, South African and Zimbabwean miners engaged in widespread, violent strikes resulting in severe supply disruptions and constrained market supplies.  · An estimated 60% of South African mines currently operate at a loss or at break-even. · Economic conditions in the United States and China continue to improve and that has stimulated automotive sales and increased demand for platinoids. · Increasing environmental regulation of the auto industry in emerging market countries has resulted in higher demand, especially for palladium. · Although information from Russia operations is closely guarded and always opaque, it has been widely reported that historic palladium stockpiles are depleted and exports will cease this year. · Analyst consensus for significant 2013 supply deficits in both metals has led speculators to accumulate net long positions. In my opinion, there is a new price paradigm developing for platinum and palladium. The supply-side case is particularly compelling with the economic viability of most primary platinum-palladium mines not economic given current price regimes. Unless prices rise substantially, South African supply disruption will evolve into long-term destruction. The bullish case is strengthened if Russian palladium exports are indeed ending.  To my knowledge, there are no new major mines that can replace these looming reductions in platinoid supply. For a myriad of reasons, I maintain an ebullient view of platinum and palladium supply and demand fundamentals and predict that prices will remain robust for the short- to mid-term.  P.S. If you want to learn more about my evolving views of the platinum and palladium markets, check out these interviews: August 10, 2010; August 25, 2010;October 14, 2011; November 14, 2011; September 12, 2012; and February 14, 2012. Ciao for now,            Mickey Fulp Mercenary Geologist Acknowledgement: Michelle Lopez is the editor of MercenaryGeologist.com. The Mercenary Geologist Michael S. “Mickey” Fulp is a Certified ProfessionalGeologist with a B.Sc. Earth Sciences with honor from the University of Tulsa, and M.Sc. Geology from the University of New Mexico. Mickey has 35 years experienceas an exploration geologist and analyst searching for economic deposits of base and precious metals, industrial minerals, uranium, coal, oil and gas, and water in North and South America, Europe, and Asia. Mickey worked for junior explorers, major mining companies, private companies, and investors as a consulting economic geologist for over 20 years, specializing in geological mapping, property evaluation, and business development. In addition to Mickey’s professional credentials and experience, he is high-altitude proficient, and is bilingual in English and Spanish. From 2003 to 2006, he made four outcrop ore discoveries in Peru, Nevada, Chile, and British Columbia.  Mickey is well-known and highly respected throughout the mining and exploration community due to his ongoing work as an analyst, writer, and speaker.  Contact: Contact@MercenaryGeologist.com Disclaimer: I am not a certified financial analyst, broker, or professional qualified to offer investment advice. Nothing in a report, commentary, this website, interview, and other content constitutes or can be construed as investment advice or an offer or solicitation to buy or sell stock. Information is obtained from research of public documents and content available on the company’s website, regulatory filings, various stock exchange websites, and stock information services, through discussions with company representatives, agents, other professionals and investors, and field visits. While the information is believed to be accurate and reliable, it is not guaranteed or implied to be so. The information may not be complete or correct; it is provided in good faith but without any legal responsibility or obligation to provide future updates. I accept no responsibility, or assume any liability, whatsoever, for any direct, indirect or consequential loss arising from the use of the information. The information contained in a report, commentary, this website, interview, and other content is subject to change without notice, may become outdated, and will not be updated. A report, commentary, this website, interview, and other content reflect my personal opinions and views and nothing more. All content of this website is subject to international copyright protection and no part or portion of this website, report, commentary, interview, and other content may be altered, reproduced, copied, emailed, faxed, or distributed in any form without the express written consent of Michael S. (Mickey) Fulp, Mercenary Geologist.com, LLC. Copyright © 2013 Mercenary Geologist.com, LLC. 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