A new book for investors contains plenty of in-depth information for
those whose livelihoods are linked to gold, silver and platinum
You handle precious metals every day, but how much do you know about
them? In The New Precious Metals Market(McGraw-Hill), author Philip
Gotthelf applies his expertise as a precious-metals analyst to this practical
account of how gold, silver and other precious metals influence lives and
Publisher of the COMMODEX® daily commodities trading system and a
weekly futures forecasting service, Gotthelf has appeared on television,
written articles and been quoted frequently. The New Precious Metals
Market,his second book (his first is Techno Fundamental Trading,McGraw-Hill,
1995), was written for investors but offers plenty of background, technical
and "insider" information to interest anyone who shares his admitted
love of precious metals, particularly gold.
"If you have ever seen and held an ingot of pure 24-karat gold,"
writes Gotthelf, "you know it is not 'just a commodity.'" His
love of the metal, he says, was kindled by a visit at age 12 to the Federal
Reserve vault in New York City, where he gazed upon "bricks of gold
... in absolute glowing splendor." A $5 gold piece given to him before
the visit helped hook Gotthelf for life.
Because of the world's undaunted interest in gold, says Gotthelf, most
gold mined throughout history is accounted for today. In his new book, he
evaluates gold's role as a revered historical symbol and its relatively
short-lived status as a monetary standard. Referring to today's "implied
gold standard," Gotthelf observes that even though nations have largely
abandoned metals for "full-faith-and-credit" monetary systems,
governments continue to hold millions of ounces of gold in reserve proof,
he writes, of the universal belief that "if all else fails, gold will
retain its monetary value."
Jewelers will find Gotthelf's analyses of the uses and futures for gold,
silver, platinum and palladium informative. For example, he says that despite
recent "unthinkable" low prices, there's little reason to believe
precious metals will lose their status as revered and necessary elements.
In writing about gold, Gotthelf notes jewelry accounts for the vast majority
of gold used today. He expects jewelry to "lead the growth curve (for
future gold consumption) and investment will represent the balancing wheel."
Demand for gold in other industries such as electronics and space
technology will continue to grow also, he says.
The Far East and Europe will continue to lead world gold jewelry production
in the next millennium, he says, with substantial growth expected from India.
Expanding wealth in China and India, he adds, should cause gold consumption
to increase dramatically in those countries as well. Expect higher consumption
in the "sleeping giant" countries of the Commonwealth of Independent
States (former Soviet bloc nations) and in Latin America.
Gotthelf notes that current and future gold supplies should be more than
capable of meeting demand. "The trend in gold production is solidly
up," he writes. Advances in extraction technology have "massively
accelerated" gold output and even transformed a virtually non-producing
area such as South Carolina into the ninth-largest gold-producing state
in the U.S. Gotthelf says gold production is likely to increase in the U.S.,
Canada and Indonesia as it levels off in South Africa. Untapped gold in
the world's oceans and Pacific Rim countries adds to future production potential.
Silver, as a long-term investment, will fare less well, says Gotthelf. Though
he expects silver to retain potential in electronics, its use in photography
which accounts for 40% of output is threatened by the dawn of
digital imaging. Gotthelf suggests falling silver prices could one day cause
a return of silver coinage to absorb excess quantities and keep prices stable.
By contrast, platinum and palladium have exceptionally bright futures from
investment and manufacturing viewpoints, says Gotthelf. Though platinum
is a rare metal (its 156-ton 1996 output is dwarfed by gold's 4,300 tons
in 1996 and silver's 453 tons in 1995), Gotthelf calls it "extremely
important" for the jewelry, automotive and petroleum refining industries.
A key aspect of platinum jewelry's popularity, he says, is the visual contrast
the metal provides to Asian skin tones. This characteristic has pushed demand
in Asia, he says, as well as India, Africa and among ethnic groups in the
U.S. and Canada. He expects interest in platinum jewelry to grow steadily,
coupled with intense industrial use to keep platinum prices high.
Palladium, another member of the Platinum Group of metals, is also rare.
Its usage and price are similar to that of platinum, though its heaviest
use occurs in the automotive and electronics industries. In jewelry, its
exclusive use is for alloying platinum and gold. Gotthelf predicts palladium's
scarcity and industrial demand will make it a potentially rewarding investment
well into the millennium.
Overall, Gotthelf sees bright futures for all precious metals (even silver,
despite threatening factors), regarding supplies and investment potential.
He cautions that price trends will still be subject to the same types of
factors in the future they have in the past: international crises, economic
conditions, industrial demand and investor activity. Prices for gold will
continue to be the hardest to predict, he says, partly because of the large
amounts of gold that can quickly enter and exit the market (because it's
controlled by governments, investors and hoarders), and because gold production
is expected to remain strong.
As Gotthelf demonstrates in his analysis, the way to anticipate precious-metals
activity is to understand the past and how it relates to current conditions.
"A true follower of precious metals," he writes, "must study
geology, technology, geography, demographic patterns, politics, economics
and history." But he believes the value of these metals is secure.
"People's lives," he says, "have been, and will continue
to be, surrounded and influenced by precious metals."
Metals Market Tips
Professional Jewelerasked author Philip Gotthelf what advice
he has for jewelry retailers and manufacturers regarding uncertainties in
the precious-metals market. His response:
"The decline in the wholesale price of precious metals, particularly
gold, provides an opportunity to increase the profit
margin on many items. The public doesn't correlate the price of gold
with the price of jewelry per se. Demand for the metal is not lacking, and
supply is sufficient to keep prices depressed for the time being."
"Consider lines positioned for lower-end consumers.
One problem in marketing precious metals is the price is too high for those
most prone to purchase it. There's a strong ethnic attraction to gold, especially
for large pieces, which are normally prohibitive. If manufacturers can bring
down prices, they can stimulate an audience that has been foreclosed from
"People like gold. No matter how cheap it
becomes, it's still an attractive metal. Manufacturers should go
after these sales now, while maintaining their premium 18k lines."
by Richard L. Carter
Copyright © 1998 by Bond Communications.