Hawaii Six O - Gary Wagner
Why gold is underperforming when compared to the other precious metals
Kitco Commentaries | Opinions, Ideas and Markets Talk
Featuring views and opinions written by market professionals, not staff journalists.
It's relatively easy to see when we look at recent activity in the precious metals complex that at least recently, gold has been lagging behind gains seen in the other three precious metals.
There are many potential reasons for this occurrence, but one of the primary underlying forces is the incredible gains witnessed during the pandemic in the U.S. equities markets. While it might be said that market participants are incredibly over-optimistic, one clear fact remains, and that is those market participants, when looking at U.S. equities, are forward-thinking. In other words, they're looking as to what will happen in the future rather than focusing on the current economic scenario.
With that optimism and the ability to look forward and focus upon significant upcoming technological transformations, it is the precious metals widely used in new applications that will experience the most significant benefit in terms of price gains. The move away from fossil fuels to solar energy is just one example. Silver is a precious metal that is essential in the creation of solar panels. As the world moves to more solar power, more silver will be needed, and prices will benefit from that. Another prominent example is the transformation in the automotive industry.
Why the use of platinum and palladium will continue to grow
Before electric and hydrogen cell vehicles, the only real use for platinum and palladium was in catalytic converters because their chemical properties can remove dangerous and hazardous byproducts that result from combustion engines. Currently, platinum is used widely in the chemical industry because its properties can be a catalyst and bind with nitric acid, silicon, and benzene. However, in the future, one of its primary uses could be to improve the efficiency of fuel cells as well as continued use for computer hard disks and thermocouples.
Platinum is also the heaviest of all of the precious metals, weighing twice as much as gold. This precious metal is also ten times rarer than gold.
The six naturally occurring isotopes allow this precious metal to be primarily used for vehicle emission control devices, accounting for 45% of its use. To this day, its most common use is as a catalyst to enable the complete combustion of unburned hydrocarbons from the exhaust into carbon dioxide and water vapor.
Another major factor that will support higher pricing in the future is that platinum, unlike gold and silver, cannot be readily isolated in a comparatively pure state by simple fire refining. In other words, it requires a complex aqueous chemical process.
It is due to the reasons we spoke about above that the three precious white metals (silver, palladium and platinum) are going to be necessary and instrumental in the future as new applications are developed. Used in technology such as new battery technology and a major component used in the creation of hydrogen fuel cells. The future of these metals seems to shine extremely bright. Although gold is used in technology, it appears that platinum and silver's chemical properties will continue to find their way into new technologies and therefore draw a greater demand.
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Wishing you as always, good trading,