Boris Schmitz-
Thiersen’s
family has been selling jewelry in the same location in
Cologne
,
Germany
, for more than 100 years, with a brief sabbatical during World War II. Only in the past year, however, has he begun offering bracelets made of a peculiar white metal mined in
South Africa
.
“It’s
pure palladium,” he explains.
“Pretty, isn’t it?”
Yes – and relatively cheap, trading around $450 per troy ounce at press time, compared to just under $2,000 for the same amount of platinum, and about $1,000 for gold. Silver, by contrast, is trading at between $17 and $18 per ounce.
Schmitz-
Thiersen’s
decision to peddle palladium instead of platinum is one of those quirky little flips of the mind that, if multiplied by all the jewelry stores in the planet, could have major ramifications for the price of these two most precious of metals, and a quick perusal of Cologne’s jewelry shops indicates the minds are, in fact, turning over.
Samantha
Trickey
, precious metals consultant at the Commodities Research Unit (CRU) in
London
, points out that jewelry currently accounts for about 20% of total platinum demand, but that, unlike gold, platinum and palladium are primarily industrial metals and not stores of value.
“If prices of platinum get too high, you could see a substitution on the industrial side to palladium,” she
says (see “Precious industrials
”). “This is why I’m more bullish on palladium than I am on platinum.”
Yet it is platinum’s secondary function as a precious metal that is driving prices to the stratosphere, along with a rickety South African electricity grid.
ELECTRIC GRIDLOCK
Most coverage of gold’s rise focuses on two factors: the plunge in the U.S. dollar and a general fear of exposure to paper assets. Less attention has focused on the supply side of gold and silver, but more of platinum, palladium and plain old copper.
“In
South Africa
, the main power supplier, Eskom, has run out of reserve capacity, and this has caused rolling power cuts,”
Trickey
says. “Many platinum and palladium mines had to close temporarily at the end of January, since power could not be guaranteed, and this posed a safety risk, especially for the underground mines.”
As a result, mines are operating at just 95% capacity, at a time when industrial demand, primarily in
China
, remains at full throttle. “They’re able to operate on that, but companies are looking at ways to find individual power sources of their own,” she says.