What about platinum and palladium?

After reading my admittedly depressing economic predictions for the next two years, a reader asked me what I think will happen to the platinum industry, since it is such an important industry for South Africa.

Industrial vs Monetary Metals

Metals like platinum and palladium are a bit different from gold and silver, because they are mainly seen as industrial metals.

If you expect a global economic slowdown, then it follows that you expect the prices of industrial metals to fall, since the industrial demand for them will decrease.

Gold, and especially silver, also have industrial uses, but I think they derive most of their value from being seen as “monetary metals”.

I say this because gold and silver are the only substances on Earth that were chosen by humans to be used as money, over and over again, for a period of almost 6000 years.

For small periods of time other money systems were tried. These system included everything from sea shells to pieces of sticks to paper money. Once those systems failed, like all of them inevitably do, people mostly just ended up choosing to use gold and silver as money again.

So personally my feeling is that history will repeat once more. I think the current debt-backed fiat currencies will fail and people will once again choose to use gold and silver as money.

I may be wrong, but I really do not have anything better to go on. Except perhaps Bitcoin? But that’s a long shot considering it has no proven track record!

In Summary

The sequence of events/stages that I expect in the near future:

  • I expect that the global economy will slow down and that the prices of all industrial commodities will fall, including metals like platinum and palladium. This is typical of a deflationary depression and I think it has already started.
  • I expect for governments and central banks to respond to the deflationary depression by more QE and other forms of money creation, to make up for the widening budget deficits that result from the dwindling amounts of taxes (because of the economic slowdown) and increasing amounts of government spending (since more and more people will become dependent on “government support” and socialistic handouts if they loose their jobs during an economic slowdown).
  • I expect the money printing will cause people to loose faith in fiat currencies and start looking for alternative forms of money in which to store their wealth and conduct trade.
  • I think there is a good chance that the two primary monetary metals, gold and silver, will become popular again, just like has happened so many times throughout history.

Once again, I need to stress that I am making these predictions from the things I learnt by studying history, especially the history of money, and noting the patterns that I’ve seen repeating over and over again.

I know more than most people do about monetary history, but there are lots of gaps in my education. To study everything there is to know will probably take several lifetimes.

I really cannot tell you for sure what is going to happen in the future – I may be completely wrong! So you better take all of these predictions with a pinch of salt!

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  1. Franco

    I’m currently living in Mokopane, working for the platinum industry. The area will become the new platinum capital of the world, so I’m very interested in the future of platinum since it is currently tied up to my own financial short term destiny.

    I must say I agree with you, however platinum is extremely scarce, and South Africa owns just about 85% of global platinum. So my wish is that platinum will have long term value compared to that of gold, however as you mentioned, gold has a 6000 year head start.

    Interesting future ahead for South Africa

  2. Francois Viljoen

    @Franco

    >> Interesting future ahead for South Africa

    That is for sure.

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