Over the past few weeks, some of my friends in the precious metals community have noted NICE price action ("price moving up") in platinum. See below charts from kitco.com for the price over the past 30 days:
The price of platinum has risen from $1551 per oz to $1734 (up 11.7%), a pretty decent run. Much of this is probably due to platinum production problems and labor problems in South Africa, the world's number one producer. Car sales (the biggest end-user of platinum) are apparently up in the very important market of China as well (caution must be used with any data from CHINA, like I have to tell you guys that?).
Compare platinum with gold over the same 30 days:
Gold is about $1675 per oz (up only 1.5%, and off its recent high of $1690). So, OK, "fundamentals" (problems in Pt production in South Africa) might explain this price movement in platinum.
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Platinum has almost always sold at a premium to gold historically Over the past four or so years, however, platinum and gold have moved together, almost a 100% correlation:
Note, however, that platinum was MUCH higher than gold was ($2000 - $2200 per oz vs. gold at $900 - $1000) soon before the financial crisis really got going in 2008.
I do not have historical information handy, but platinum through history has sold at some 50% higher (or so, readers are invited to correct me!) on the average than gold.
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I would now invite reader scrutiny of the above platinum charts. Is the recent move in platinum really all that much? I would say "No", not really. Note that platinum has been in a trading range of $1400 - $1950 since about October 2009!
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For our interest, let's look at palladium, "platinum's little sister". Pd is also used as a catalyst in (some) cars, and does have some interesting properties as well (see my article on the platinum group metals here.).
Palladium is up some 14.8% in the past month. And the past 5 years?
Now THERE'S an interesting chart! Palladium (more than five years ago, so I do not have handy access to the pricing data) was well over $1000 / oz because Ford had bought up a whole lot of it based on the Russians saying it was "scarce", I read that Ford took a $1 billion (or more) loss on their palladium, whoops! But, look where we could have bought palladium in late 2008, as low as under $200...
And just to finish up what kitco.com has re platinum group metals, here are the same charts for rhodium:
Do you think that rhodium does not move around much? How about this (past five years):
Yow!
From $10,000 at its peak, to $1225 now! Now THAT is a swan dive! It went off the cliff in the financial crisis in 2008. Bet you are glad you didn't buy any back then!
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My main point in this article is that the recent moves in platinum appear to me to be nothing unusual.
N. N. Taleb, in his new book Antifragile warns us to watch out for the noise when looking for the signal... And, as I mentioned before recently (http://robertmixblog.blogspot.com/2013/01/stocks-have-been-performing-well.html), "cherry-picking dates matters" a lot! Yes, production problems in South Africa (appear to) have affected the recent price in platinum, but the price movements by historical standards is NOT impressive.
I am NOT poo-poo-ing platinum! I own some and love it! And there is an argument for saying its price future may be better than gold (although King Gold will win in the end).
Update:
Contributor "Benjamen" at pmbug.com supplied me the below historical chart showing price of platinum (top), gold (middle) and the platinum:gold price ratio (bottom) for the years 1976 - 2005. While there is considerable variation in that ratio, it works out to about an average of 1.3: 1.0. The ratio is now about 0.95:1.0 (platinum is relatively cheap by historical standards). Thanks, Benjamen!
I got some nice feedback from my article on basic facts about gold (http://robertmixblog.blogspot.com/2012/04/gold-basic-facts-for-99.html) and one reader asked me if I would do similar articles for one or more other precious metals. So here you are, "Veyron", you're famous! Today I tackle platinum and the other "platinum group metals".
Much of the information about these metals comes from wikipedia.org, thanks wiki!
I chose to write about platinum (and its cousins) because Pt is my second largest $-value holding among the precious metals.
Below is a small table showing the atomic number and chemical symbol of each platinum group metal:
44
45
46
Ru
Rh
Pd
76
77
78
Os
Ir
Pt
All of the platinum group metals are used to some degree or other in electrical contacts, including spark plugs for cars.
Platinum (Pt)
Platinum is the least reactive metal, it is only dissolved by Aqua Regia (25% nitric acid and 75% hydrochloric acid) and has a melting point of 1768 degrees C (Celsius, so quite a bit more using degrees Fahrenheit). Platinum is corroded by halogens (chlorine, etc.), cyanides, sulfur and alkalis (sodium, etc.). Platinum is much rarer than gold, there is approximately 10 times as much gold as platinum.
The specific gravity (density) is 21.45 g/cc.
Platinum is fairly hard for a precious metal (Mohs hardness of 4 - 4.5, Mohs hardness is NOT a good measure of hardness, but it is familiar to rock collectors, etc.). (Gold has a Mohs hardness of 2.5, rather soft).
Platinum can hold a lot of hydrogen gas (although palladium can hold even more).
Wikipedia writes that platinum salts are somewhat toxic to the eyes and skin, but the metal itself is not.
South Africa produces roughly 80% of the world's platinum, Russia about 11% and there are much smaller amounts produced by other countries (including the USA, in Montana).
Wikipedia also writes that in 2006 there were about 239 tonnes (metric tons, equals 1000 kg or approx. 2200 lbs) sold:
Sector tonnes
Vehicle Catalytic Converters
130
Jewelry
49
Electronics
13.3
Chemical Industry Catalyst
11.2
Various Minor Applications
35.5
It is not clear how much platinum is used by investors, probably not much. There are lots of places you can buy platinum coins, mostly on-line, although some coin stores do carry them.
Palladium (Pd)
Palladium is the next easiest to buy of the platinum group metals. Canada for a few years made Palladium Maple Leafs, I am not sure if they still do. Russia (USSR) also made two sizes of "Ballerina" palladium coins. I do not know if they are still made or not.
Palladium has a density of 12.02 g/cc, melts at 1555 degrees C and has a Mohs hardness of 4.75.
Palladium has two interesting properties that may make it play a more prominent role in the future:
1) It is impermeable to all gases except hydrogen
2) It can store up to 700 times its volume of hydrogen
The above two properties may become very important if they ever get fuel cell technology working well.
Palladium's main use in is catalysts, but there is some use as jewelry and a very small amount held by investors (like me!).
In 2007, Russia produced 44% of the world's Pd, followed by South Africa producing 40%, Canada 6% and the USA 5%.
Rhodium (Rh)
Rhodium is the last of the three platinum group metals that are available in investment coin form (www.rhodiumcoin.com). kitco.com also sells rhodium, but not in coin form.
Rhodium has a density of 12.41 g/cc, melting point of 1964 degrees C and a Mohs hardness of about 6.0 (harder than glass and similar to steel).
Rhodium is extremely rare, exported by South Africa and Russia. Annual world production is only about 25 tonnes.
Almost all rhodium is used as a catalyst (especially used in vehicles). Rhodium does have uses in alloys with other platinum group metals and is also used in monitoring neutron flux levels in nuclear reactors.
Rhodium is also fairly well known for its dramatic price swings. A few years ago, the price of rhodium soared to a bit over $10,000 per toz! It is now around $1350, priced below both gold and platinum.
Ruthenium (Ru), Iridium (Ir), Osmium (Os) and one more!
Ruthenium, like the other platinum group metals has a high resistance to chemical attack. The density is 12.45 g/cc, melting point of 2334 degrees C and has a Mohs hardness of 6.5 (harder than most steels). Only some 12 tonnes of Ru are produced each year, and the world reserves are thought to be some 5000 tonnes. It is used to harden platinum alloys, to improve corrosion resistance in titanium, and to make wear resistant electrical contacts. A new use of Ru is as a component 3% or so) for high-temperature single-crystal superalloys used for turbine blades in jet engines (see below re Rhenium).
Iridium has a density of 22.56, very close to the densest element (Osmium). Ir has a very high melting point of 2466 degrees C and has a Mohs hardness of 6.5. Iridium has very high hardness and strength properties beyond Mohs hardness, which is means that it is used where very tough and hard metal is needed in components, but being so hard, it is hard to work with. Wiki: Despite these limitations and iridium's high cost, a number of applications have developed where mechanical strength is an essential factor in some of the extremely severe conditions encountered in modern technology.[4]Iridium becomes a superconductor at 0.14 degrees Kelvin. Ir is the most corrosion resistant metal known (I do not know how that remark squares with platinum being the least reactive metal). Not even Aqua Regia dissolves Iridium. An alloy of platinum and iridium was used to fabricate the "Standard Meter" and "Standard Kilogram", both are in Paris. Annual production is around 3 tonnes. Iridium is found in MUCH higher amounts in meteorites than in the crust of the earth and the "K-T Boundary" (Cretaceous-Tertiary Boundary, some 65,000,000 years ago in the geologic record), it is thought that this is what remains from the big meteorite that hit the Yucatan and killed off the dinosaurs, in that so much of the debis after impact got blown into the atmosphere and then settled worldwide. Wiki has one more interesting thing about iridium: It is thought that the total amount of iridium in the planet Earth is much higher than that observed in crustal rocks, but as with other platinum group metals, the high density and tendency of iridium to bond with iron caused most iridium to descend below the crust when the planet was young and still molten.
Osmium has the highest density of any known metal (22.59, just barely higher than iridium). It's melting point is 3033 degrees C (over 5000 degrees F) and has a Mohs hardness of 7.0. Like iridium it is used in electrical contacts and instrument pivots. Osmium is the rarest stable (non-radioactive) metal on the planet and is found at an average concentration of 0.05 ppb (or 50 parts per trillion). Neither the producers of osmium nor the US Geological Survey report on osmium production. The USA uses about 2000 troy oz each year, and so it is inferred that the annual production is less than 1 tonne.
Rhenium (Re), while not a platinum group metal, is expensive, rare and shares some applications with those metals. Rhenium will have a future in the superalloys mentioned above (with ruthenium), tehg next generation of turbine blades for jet engines will use rhenium and ruthenium. Rhenium is priced by the kilo, priced out to the troy oz it would run some $140 / oz.
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So how can one buy platinum group metals? I will deal with the three rare ones (for which there are no coins) as they are hard to get, and not really suited for investment purposes. There is one company (there may be more, probably is, for researchers, etc.) that can supply these three (Ru, Ir and Os) in small quantities:
elementsales.com is part of Metallium Inc., and is specially geared to selling small amounts of almost every element, mostly to researchers, hobbyists and collectors (yes, there are collectors of the chemical elements).
There is another company out of the UK that sells many minor metals to the wholesale trade. They are very good at sourcing rhenium, for example. The company is called Lipmann Walton & Co. Ltd., their website is http://www.lipmann.co.uk/.
Click on the highlighted metals to see more details or contact us.
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And for investing in platinum and the other two (palladium and rhodium)? The below table shows specifications of various platinum coins available for sale, the Pt Noble is actually from a private mint (The Pobjoy Mint). Note that Canadian Palladium Maple Leafs (1 troy oz only) and the Cohen Mint 1 toz rhodium coin are also available.
Note! The O.D. (Outer Diameter) of the Pt Eagle is the same as the Gold Eagle! This means that you can stack the Pt Eagles in the same plastic tubes ("US Mint" tubes) as the gold ones. These tubes are how many stackers collectors store their Gold Eagles, the tubes themselves snugly hold them (and so "control" or measure the 32.70 mm measure). These tubes hold up to 20 Gold Eagles and 23 Platinum Eagles.
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Here is spot pricing (at least as of 19 April 2012). Note that small buyers (that's us! Shrimps!) will pay quite a bit more than these prices as there is not nearly as much liquidity for many of these metals.
