Precious Metals Like Silver and Platinum

Precious metals refer to gold, silver, platinum, palladium, and the like. They are all shiny metals, but their uses and characters are quite different.

Gold is the representative 'store of value,' with a stronger character as a safe-haven asset and currency substitute than as an industrial material.

Silver and platinum, on the other hand, have a much larger share of industrial demand. Silver is heavily used in electronics and solar panels, and platinum in auto parts. So these two move more sensitively to the economy and industrial trends.

It helps to first know that even among precious metals, the character splits depending on whether it's a 'safe-haven asset or an industrial material.'

A famous indicator for understanding silver is the 'gold-silver ratio.' It's the number showing how many ounces of silver the price of one ounce of gold equals.

For example, if this ratio is 60, it means 'one ounce of gold = 60 ounces of silver.' Historically this ratio has moved around roughly 60 to 1 (broadly 60–80), and going well above 80 or below 50 is seen as an extreme state.

An important characteristic is that silver swings far more than gold. Because the silver market is smaller in scale (dollar value) than the gold market, prices bounce or drop more sharply even for the same amount of money coming in. It tends to rise more when rising and fall deeper than gold when falling.

Platinum is a bit special. Over 60% of platinum demand is industrial, and about half of that is used in cars. In particular, it goes heavily into catalytic converters (autocatalysts) that purify exhaust gases.

So the price of platinum is swayed much more by the 'auto industry economy' than by 'jewelry demand.' It rises when cars sell well and gets pressured when the auto economy weakens.

Recently, the spread of electric vehicles is a variable. EVs don't need exhaust-purifying catalysts, which is a factor reducing traditional platinum demand. That said, new fields that use platinum, such as hydrogen fuel cells, are also emerging, so the direction of demand is changing.

Ultimately, platinum often moves more like an 'industrial metal' than a 'precious metal.'

Silver and platinum are precious metals like gold, but their investment character is quite different.

What they have in common is that both have no dividends or interest. There is no cash flow that grows on its own no matter how long you hold.

The difference is their dependence on industrial demand. Silver and platinum are sensitive to the economy and industry, so they are more volatile than gold. They can rise more fiercely than gold in a bull market, but conversely they can fall deeper and more painfully in a bear market.

Rather than 'silver/platinum instead of gold,' it's important to approach them understanding that the shape of each one's risk is different.