Other precious metals, Gold Investment Basics, Why Invest in Gold?, Gold, Gold and Precious Metals Investing   Other precious metals, Gold Investment Basics, Why Invest in Gold?, Gold, Gold and Precious Metals Investing 
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Other precious metals

Home > Gold and Precious Metals Investing > Other precious metals

Other precious metals, Gold Investment Basics, Why Invest in Gold?, Gold, Gold and Precious Metals Investing
Precious metals include Ruthenium, Rhodium, Palladium, Silver, Osmium, Iridium, Gold and Platinum. Their precious nature comes from the fact that they are very scarce and unique among commodities in the manner in which they are judged as a measure of wealth. The markets for these metals are exceedingly complex and distorted from normal supply and demand laws by several interrelated factors. Some of these are:
  • Gold has a direct link with the monetary system and most precious metal dealers believe in a close connection between the gold price and the prices of other precious metals. This is justified to some extent by their common characteristics of scarcity, easy storage, uses, similar origin (in most cases) and historical association.

  • Most precious metals are by-products or co-products in the manufacturing process of other, less rare metals. Hence, supply and demand rules for the different elements may not coincide and may not make production of a particular precious metal viable when the less rare metal is in over-supply, temporarily or permanently.

  • Industrial uses of precious metals involve some 86% of manufactured products though they have been mostly used as components in highly sophisticated areas of technology or expensive jewelry, where the value of the metal in the equipment or system might be insignificant. A manufacturer is often forced to purchase the metal at almost any price because of its unique and unsubstitutable properties. Also, when continuity of supply and quality are important to the industrial consumers of such precious metals, they often pay higher prices than the free market price.

  • The “erstwhile Soviet Union” countries and South Africa account for the production of more than half of the world’s precious metals (except silver). This means that governmental politics play a much greater role in precious metal markets than in other commodities.

  • All the precious metals are used in the manufacture of jewelry, whose demand is very much dependent upon the vagaries of fashion and taste.

  • Precious metals, historically, have shown an ability to retain their value even in periods of extreme economic dislocation. Hence many investors use precious metals as an investment hedge during times of economic uncertainty.

Precious metals have many important physical characteristics which make them indispensable to modern industry. For example; gold is the most ductile metal and one gram of it can be drawn into a wire 2,300 meters long; silver has the highest electrical conductivity of any metal; one cubic centimeter of palladium is capable of absorbing 900cc of hydrogen; osmium is the heaviest metal; iridium is the most corrosion resistant of all elements; and the platinum group, in general, contains the hardest metals.

The most important use of silver (approximately 20%) is in jewelry, silver cutlery and art objects - often alloyed with copper (sterling silver contains about 7.5% copper). Coins account for about 3%. Silver is much more sought after than gold in industrial usage. Photographic materials accounts for some 36% of usage, while silver's ability to conduct both heat and electricity better than copper makes it widely used in computers, thermostats, switchgears and other industrial uses - about 41%. The latter includes use in solders, catalysts, brazing alloys, batteries and pharmaceutical products.

In addition to its use in jewelry, platinum has several applications as a catalyst, either in its pure form or as an alloy with rhodium. This allows a large range of chemical reactions such as that of reforming petroleum, producing pharmaceutical products, producing nitric acid and for removing hydrogen and chlorine (especially in organic chemical synthesis). Platinum is also used in electronics, while its incorruptibility makes it ideal for crucibles (along with rhodium and iridium additions) and retorts used in handling highly corrosive chemicals or where resistance to high temperatures is needed. The latter makes it also valuable for use in machines which run at high temperatures.

Of approximately one million troy ounces of platinum used annually, a bit over half is used by the automotive industry. Other users are the chemical (12%), electrical (9%), glass (5%), petroleum (7%), dental/medical (4%), Jewelry (3%), and others (8%). Use by the automobile industry is primarily for catalytic converters - virtually required by law to reduce levels of toxic fumes emitted by automobiles.

Almost totally corrosion-free, palladium is employed in alloy form with other precious metals in electronics (such as electrical contacts, particularly in telephone systems) and as resistance windings, especially where high precision is required. It is also used as in electro thermal fuses (particularly in electric furnaces) as well as thermocouples and as a catalyst for the production of such items as ethylene, vitamins A and E, brazing, welding (particularly jewelry), etc. Palladium differs from platinum in that the normal forces of industrial supply and demand are much more important. However, production of palladium is only about 80% that of the level of platinum. Palladium is often found with nickel, and this generally affects its supply.

With an extremely high resistance to corrosion, rhodium is used to plate brass and steel in order to prevent corrosion due to sea water and other elements. Such coatings must be extremely thin and used only when the cost is justified (rhodium costs five to six times more than palladium). As an alloy with platinum (containing about 1% rhodium), it is used in electrical equipment, thermocouples and man-made fiber production. It is also used as a catalyst in producing nitric acid from ammonia, along with several other catalytic uses. Rhodium has a very high optical reflectivity, which makes it particularly useful as it is almost untarnishable.

Iridium is a hard, brittle metal which is difficult to work mechanically. It is usually alloyed with platinum (with iridium being less than 20%). The alloy is then used in robust precision resistance winding, electrical contacts and in jewelry (especially for setting diamonds). Alloys of iridium with osmium (osmiridium) and ruthenium are extensively used for making the tips of fountain pen nibs and other products of powder metallurgy. Iridium could be used in sensitive equipment where contact with mercury is essential, as the metal is not ‘wetted’ by the liquid metal. It is the most corrosion-resistant of all elements, and is also used to make crucibles and high temperature lab equipment. Iridium costs about 40% the value of rhodium, making it about four time more expensive than gold.

Unlike most other precious metals, osmium oxidizes easily in air and could give off poisonous fumes. But it is extremely hard and heavy, and has been useful in some applications. None of these uses, however, are very important. Still, it costs the same as palladium.

Ruthenium is mostly used as an alloy with platinum in jewelry and electrical contacts. It has limited catalytic use and sells for about 20-25% the cost of palladium.

Precious metals are also becoming very prominent in two other major usage areas - in energy generating fuel cells and the treatment of a large number of ailments in medicine. The latter has generated a great deal of interest as it has become evident that precious elements are integral to health and exhibit unique healing characteristics. The technology of fuel cells has progressed rapidly from a scientific or engineering viewpoint, but has been heavily constrained by the expense of the precious metals essential to fuel cell operation.

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