Because these metals are brilliant when polished and long lasting as they are difficult to mark and tarnish.
- Gold has long been a gift, a symbol of royalty and lasting love. One of the earliest known pieces of gold jewelry was found off the coast of Bulgaria and dated from 4,300 BC – making it nearly 6,300 years old.1 By comparison, the longest-lasting marriage is between Herbert and Zelmyra Fisher of New Bern, North Carolina, which lasted 86 years.2 Most of us are pretty safe using gold as a symbol of lasting love. Central banks certainly love gold, as their purchases in 2022 and 2023 exceeded previous records.3
- Silver jewelry is in trend today for those who want less flash, but the oldest silver jewelry is a 5,000-year-old ring recently discovered in Oman.4 The oldest silver beads are 6,400 years old5, and silver was used as currency as much as 3,600 years ago6 in the Levant7, and as cups and plates for more practical purposes before that8. Much of today's demand for silver also comes from practical uses like industrial uses for solar panels and medical instruments. Given a choice between a silver necklace or a solar panel, most Valentine's Day gift-givers choose the jewelry.
- Platinum and palladium are primarily used in automobile catalytic converters, subject to high heat and moisture levels, which would tarnish and corrode other metals. Word to the wise: platinum jewelry is a more romantic gift than a catalytic converter.
The use of these metals as jewelry over the millennia has proven to be a long-lasting psychological symbol of a store of value, as money, or as a symbol of love.
But even with lasting love, there are temptations. Something new, exciting, and different can distract one's current tastes. It can tempt even the most ardent investor. Take crypto, for example. It's young (introduced in 2009), it's emotional (2x the price volatility of gold), and it's tough to understand at a deeper level (virtually impossible to use as a currency, its stated use). Yet, cryptocurrencies are seemingly the talk of the town, garnering attention from some of the largest and most sophisticated investment houses. Unfortunately, if you forget your crypto wallet password your cryptocurrency won't last past Thursday, let alone 6,300 years.
Which leaves us with precious metals as symbols of romance. Precious metal deposits are difficult to locate, even more challenging to mine, and require great energy to refine, even for a skilled craftsperson to fashion into a keepsake. Small wonder it is associated with romance.
Beyond the Valentine's Day allegories, there are reasons for a positive outlook on these metals.
Heart of gold
Gold demand from central bankers may have shifted structurally higher. Central banks purchased 1,037 tons of gold last year9, just shy of the previous year's total of 1,081 tons, which was the highest since the data series began. Foreign central bank demand increases result from “a deeper malaise” amid “the West's proclivity to deploy unilateral financial sanctions,“ according to the Council of Foreign Relations.10 The interest rate cycle has been influential in the past as well. The last three times the US Federal Reserve cut interest rates in 2000, 2006, and 2018, gold rose 57%, 235%, and 70%, respectively.11
Silver demand is dependent on industrial activity centered in China. The use in industry, electrical components, and electronics make up the majority of demand, with sustained growth in demand from growing photovoltaic (solar panel) use.12 China produces 80% of the global solar panels, which is unlikely to change in the next few years as just one example of China-centric demand.13 Hopes of a massive Chinese economic stimulus package were dashed in 2023 as only incremental stimuli were released. Recent economic weakness and government officials have pointed toward the need for more substantial stimulus in the immediate future. China's Two Sessions14 meetings will occur March 4–5 this year. Such stimulus could increase economic and industrial activity and related demand for silver.
Precious metals' crimson and clover
Platinum and palladium use in catalytic converters make auto demand a key driver of prices, but electric vehicle (EV) adoption forecasts have become untethered to reality amid temporary growth hurdles. A recent Deloitte15 survey notes that 88% of US consumers preferred an automobile with a gasoline or hybrid gasoline/battery engine that needs a catalytic converter.16
Platinum and palladium join oil in the oversold category from our point of view. While it is true that a world full of EVs needs fewer catalytic converters and, therefore, auto catalyst metal demand may fall in the future, it is also true that higher internal combustion engine sales than forecasted would mean higher auto catalyst metal demand for platinum and palladium.
1 "6,600 Year Old Golden Pendant Discovered in Bulgaria May Be the World’s Oldest Jewelry." artnet, November 2015. https://news.artnet.com/art-world/6600-year-old-gold-pendant-bulgaria.
2 "World’s longest marriages: Secrets to a happy relationship." Guinness World Records, January 2022. https://www.guinnessworldrecords.com/news/2022/1/worlds-longest-marriages-secrets-to-a-happy-relationship.
3 "China's Gold Sales Surge As Economic Confidence Crashes." Newsweek, February 2024. https://www.newsweek.com/china-economic-woes-drive-global-gold-demand.
4 "Temple professor discovers 5,000-year-old silver jewelry in Oman." Temple Univ., February 2023. https://news.temple.edu/news/2023-02-07/temple-professor-discovers-5000-year-old-silver-jewelry-oman.
5 "Silver in Ancient Egypt." The Met, September 2018. https://www.metmuseum.org/toah/hd/silv/hd_silv.htm.
6 “Newly analyzed 3,600-year-old silver pieces are 1st currency in Levant, study shows.” The Times of Israel, January 2023 https://www.timesofisrael.com/study-claims-hoards-of-3600-year-old-cut-silver-pieces-are-first-currency-in-levant/.
7 Levant is the area in antiquity now occupied by Israel, Jordan, Lebanon, and Syria.
8 "Silverwork." Britannica. https://www.britannica.com/art/silverwork.
9 "Gold Demand Trends Full Year 2023." World Gold Council, January 2024. https://www.gold.org/goldhub/research/gold-demand-trends/gold-demand-trends-full-year-2023.
10 The Council on Foreign Relations is an American think tank for US foreign policy and international relations.
11 abrdn, Bloomberg data.
12 The Silver Institute. Silver supply & demand. https://www.silverinstitute.org/silver-supply-demand/.
13 "China will dominate solar supply chain for years – Wood Mackenzie." Reuters, November 2023. https://www.reuters.com/world/china/china-will-dominate-solar-supply-chain-years-wood-mackenzie-2023-11-07/.
14 “Two Sessions” is the collective term for the Chinese government’s annual plenary sessions of the National People’s Congress and the Chinese People’s Political Consultative Conference.
15 Deloitte is one of the Big Four accounting firms providing global audit, consulting, financial advisory and related services.
16 Deloitte. 2024 Global Automotive Consumer Study. https://www2.deloitte.com/us/en/pages/consumer-business/articles/global-automotive-consumer-study.html.
The statements and opinions expressed are those of the author and are as of the date of this report. All information is historical and not indicative of future results and subject to change. Reader should not assume that an investment in any securities and/or precious metals mentioned was or would be profitable in the future. This information is not a recommendation to buy or sell. Past performance does not guarantee future results.
Trading in commodities entails a substantial risk of loss and is not suitable for all investors.
Diversification does not eliminate the risk of experiencing investment losses.
Prospectuses for abrdn Physical Gold Shares ETF, abrdn Physical Palladium Shares ETF, abrdn Physical Platinum Shares ETF, abrdn Physical Precious Metals Basket Shares ETF and abrdn Physical Silver Shares ETF
Projections are offered as opinion and are not reflective of potential performance.
Projections are not guaranteed, and actual events or results may differ materially.
ALPS Distributors, Inc. is the marketing agent.
There are risks associated with investing including possible loss of principal.
ALPS is not affiliated with abrdn.