Platinum Versus Gold

In our previous articles, we have addressed:

• Production prices
• Inflation sensitivity of production costs of gold and platinum
• Gold market price sensitivity to production costs inflation
• Platinum market price sensitivity to production costs inflation
• Supply stability of gold and platinum
• Production price stability

In this article, we shall address the following even more striking advantages which platinum now has over gold

ANNUAL AMOUNT OF RECYCLED AND PRODUCED GOLD TAKEN UP BY THE MARKET

159,000,000 ounces / USD 539,000,000,000

ANNUAL AMOUNT OF RECYCLED AND PRODUCED PLATINUM TAKEN UP BY THE MARKET

8,000,000 ounces / USD 12,000,000,000

TOTAL AMOUNT OF GOLD ABOVE GROUND

Gold 7,628,523,000 ounces

TOTAL AMOUNT OF PLATINUM ABOVE GROUND

Taking into account the relatively small production of platinum and the total size of the platinum ETF’s we can assume the quantity of platinum above ground to be neglectable compared to gold.

THE LONG TERM BOTTOM PRICE OF PLATINUM VERSUS GOLD

The aforementioned issues combined with the enormous quantity of gold above the ground and its large production indicate that in case of a decrease of buyer’s interest, gold could go all the way down to the much lower production price and even lower.

The minor quantity of platinum above ground, the present production price being close to the market price and the rather constant industrial application are the reasons that the downside risks of platinum is minor compared to gold.

CONSEQUENCES OF A RELATIVELY SMALL SWITCH OF INVESTORS FROM GOLD TO PLATINUM

If only 0.5 % of present gold buyers would switch from gold to platinum, this would increase the present demand for platinum to 2,500,000 ounces.

Such increase of demand, taking into account that total supply of platinum is only circa 7,500,000 ounces, can be expected to push up the platinum price substantially.

A switch of 1% would probably cause the price of platinum to explode.

ESG NON COMPLIANCE OF GOLD MINING

To the best of our knowledge, most if not all gold mines endeavour to comply with ESG.

However, because of the very high price of gold, a considerable amount of illegal artisanal mining takes place, this is causing uncontrolled and unnecessary pollution combined with unhuman working conditions, illegal trading and crime.

The combination of a widely dispersed mining industry and the very polluting illegal mining makes total gold mining environmentally unfriendly in spite of the endeavour of the gold mines to comply with ESG.

PLATINUM MINING MORE ESG FRIENDLY

Platinum is predominantly mined in only a few countries and under well supervised conditions and to the best of my knowledge, most if not all platinum mines endeavour to comply with ESG.

The aforesaid quantity of platinum mining is only a fraction of gold mining and we are not aware of illegal platinum mining. As a consequence, platinum mining is de facto much more environmentally friendly than gold mining.

SIDE BENEFITS OF A HIGHER PLATINUM PRICE

• If the platinum price would rise it would enable the mines to further finetune their mining and refining in order to make them even more optimally eco-friendly
• It would permit the mines to maintain if not increase their work force and improve their working conditions
• The South Africa Treasury would also benefit substantially
• Last but not least, the shareholders of the mines would benefit as well

GREEN LOBBY INFLUENCE

There will probably always be demand for a store of value from private individuals, institutions and last but not least central banks.

It cannot be excluded that this important movement in our society will become aware of the ecological advantages of platinum mining versus gold mining and start to push both individual institutions and governments to give preference to platinum both as a store of value and jewellery.