By Hassan Malik
All that glitters is not gold. Or at least that is how the saying goes. Gold is, and has been, the hot topic for investors. But what if investors didn’t turn to gold for security? Over the past, we have established that gold is indeed a safe haven for those looking to protect themselves from the ludicrous volatility of global conditions. Just two weeks ago, we saw many international buyers increasing their purchase of gold given the heated condition in Gaza and the Ukraine. But investors shouldn’t solely focus their attention on gold. As many analysts along with many of our guests here at SmallCapPower have said, one must have a diversified portfolio. So perhaps what they said is true? From an investor’s perspective, all that glitters can be a number of other things that can bare favorable results.
- Palladium
- Silver
- Platinum
Number one on our list is palladium. Palladium is similar to gold in that it trades on a per-ounce basis and is pricey. It doesn’t hold gold’s near universal appeal but don’t let that stop you. The metal comes in bars and coins and according to experts at MSN, it knocks the ball out of the park when it comes to an investment.
Firstly, it is important to note that palladium is an essential component in a majority of technologies. It goes into everything from computers to smartphone to LCD TVs. This ties the precious metal to broader economic and global connections. The increasing use of the metal certainly contributes to its high demand, which stays strong even in cash-strapped times. But there is some bad news: palladium is increasingly more volatile than gold. The metal first became popular during the dot-com boom at which point it raced up from an estimated $100 per ounce to a staggering $1000 in five years. It then took a hit and dropped to $200 as the tech bubble burst.
Palladium can be bought through the ETFS Physical Palladium Shares (PALL) Exchange-Traded Fund. There are also a bunch of miners focused mainly on palladium mining. One of which is North American Palladium. This is by no means the only option for investors. Stock investors can chose from an array of diversified miners INCLUDING Stillwater Mining (SWC), which has a significant number of palladium holdings alongside maintaining a platinum mining business. The stock is up almost 30% up to date.
This is amongst the most volatile of precious metals. But who says reward doesn’t come without risk? After all it was only a mere 3 years ago that silver hit a high of around $50 per ounce. Unfortunately, the market is not too auspicious of the precious metal as of late with the recent numbers hovering around $19 per ounce. But disparity clearly works both ways. With the run up to the $50 benchmark ($48.70 to be precise), the return on silver significantly outpaced gold.
On top of this, a smaller per ounce value can act to the advantage of many consumers. Think of inexpensive products like food or clothes. How is one going to pay for these items with gold bars in the situation of a worthless dollar? One cannot expect to buy a piece of bread from an ounce of gold worth upwards of $1240.
There are many ways to get into the silver market. One way is through ETFs such as the iShares Silver Trust (SLV) and the ETFS Physical Silver Shares (SIVR). There are a couple of mining companies of considerable size producing silver. One of the largest is Silver Wheaton (SLW). Others include Pan American Silver (PAAS) and Silvercorp Metals (SVM).
Last on our list is platinum. Since 2005, platinum prices have roughly doubled. Investors will note that gold and platinum have a lot in common. For instance, both are metals with high per-ounce values. Recent numbers show platinum trading at roughly $1,365, just slightly higher than gold at $1240. This pattern is normal. Platinum is traditionally known for trading a tad bit higher than gold. The average ratio of platinum to gold prices has largely been between 1 and 1.5 for the past few decades, with a rough average of around 1.25 to 1.35.
In essence, if you think gold is going to rise, definitely consider platinum as well. Typically, platinum has sold for about 25% to 35% more than gold. If we were to go by this ratio then we can expect a 25% to 50% upside when gold is flat.
Investors looking to purchase platinum can look to ETFs such as the ETFS Physical Platinum Shares (PPLT). There are also a few platinum miners, however they are usually illiquid and tend to trade over the counter. This includes Anglo American Platinum (AGPPY).
