Skip to main content

How precious will the metals get?

The main drivers of the precious metal prices

The prices of gold and platinum are closely correlated, but there are certain differences between their movement. As a lot of investors are apparently paying close attention to these metals as alternative investment, I tried to summarize the main drivers behind the rising prices.

Gold:
1. Safe heaven for the US dollar holders
2. Increasing demand from Asian emerging middle class, particularly India (c. 20% of the world demand)
3. Decrease in annual production, to a large extent due to energy supply problems in South Africa

Platinum:
1. Alternative asset for equity investors (also holds for gold)
2. Increased use in environmentally-friendly technologies, for instance hybrid cars
3. Decrease in annual production, to a large extent due to energy supply problems in South Africa, which produces up to 80% of the world output

Seems like the high prices are going to be sustained for a while...

For the reference, links to gold and platinum price quotes:
http://www.gold.mitsubishi.co.jp/price/price.cfm
http://markets.ft.com/tearsheets/performance.asp?s=us@gc.1
Labels:

Comments

Post a Comment

Popular posts from this blog

Investment Banking Series: Equity Story

Investment Banking Series Post 6 Equity Story 1. What is it anyway? Equity Story is, in its essence, the reasoning why the particular stock should be bought by investors. It emphasizes the strong side of the company and places the stock in either the value or the growth category. In a nutshell, the value stock is expected to have little price appreciation, but pay out relatively high dividend, whereas the growth stock is expected to have a high appreciation potential, but not necessarily pay much dividend. How a stock is classified depends on several factors, such as where in the industry life cycle it is, what the macro conditions are, what industry it belongs to, or sometimes even if it has a hot buzzword in its description. For instance, a power generation company would usually be classified as a value stock: there is very little growth potential, but the cash flows are steady and not as much correlated with the economic conditions. An Internet portal or a biotech company ar
3 comments
Read more

Investment Banking Series: Pitch Books

Investment Banking Series Post 3 Pitch Books 1. What is it anyway? A pitch book is the paramount of days and nights of a banker's hard work. It is a marketing tool that tries to set apart basically very similar banks and to support the claim that THIS bank, and NO ANY OTHER should be selected to arrange the deal. They say pitch books used to be actual books, but in the present world they are Power Point presentations printed out and bound in a plastic cover. The main purpose of the pitch book is to deliver two messages to the prospective client: (1) "we understand your business very well", and (2) "when it comes to arranging your deal, we are the best fit". Both claims are usually weak at best, but they are made elaborately and extensively, and the resulting multi page document often looks impressive. 2. Typical structure A pitch book will have varying structure depending on what product is being proposed, but there is a lot of similarities. Below is o
1 comment
Read more