When comparing gold to other metals that are considered precious, there does seem to be a pretty large discrepancy. Silver would be in a pretty fair relation to gold in terms of its price-'preciousness' ratio (somewhat undervalued), but when you look at the PGMs (platinum group metals) the picture is different.

In 2007 the world produced 78.7M Oz gold compared to only 7.1M Oz palladium, 6.6M Oz platinum and 824,000 Oz rhodium. Price per Oz in same order (approx.): 930 - 200 - 1000 - 1000. Obviously there is a huge price difference here in relation to production, and these are all considered precious metals, which means that they all are very similar - for example they don't oxidize particularly easily.

So why the big differences? All of the PGM's had about 50% of their demand coming from the auto-industry for catalysts (in 2007), and we all know what's been happening there lately. In the summer of 2008, rhodium was priced at ~$10,000, while the price-changes for palladium and platinum were not as dramatic, but still a lot larger than for gold or silver.

It's generally considered to be because of the (previously) growing auto-industry that the prices of PGM's went up so much, for example rhodium was at only $200 in 2001. It wasn't the only reason however, the other thing that made prices rise was the trouble of power-generation in South Africa. Today South Africa has ~70% of world production of PGM's. The electrical power shortage in the country is a long term problem, because the country has a monopoly that opposes private initiatives and then there's also the black empowerment laws that sometimes puts poorly qualified people in charge (which is clearly related to an otherwise large shortage of skilled labor in the country).

Apart from the auto-industry there is a pretty large portion of demand coming from other industrial demand, as well as jewellery (less than 20% on average); the demand for PGM's as investments are, although clearly existing, very small.
If the PGM's really are precious, shouldn't they be just as interesting for crisis-investment as gold or silver? I think that the main reason for the firmer position of gold and silver would be the fact that they've been used as money in the past, and might be so again, and also the much more easy accessibility of gold and silver. And by the looks of it today, much of the PGM-prices are ruled by the assumption that there will be a large shift toward electric cars in the coming years and that the problems in South Africa will not be large enough to work against the fall in demand.

I suppose in the end, if you want to somehow invest in PGM's, it would be on a more ideologically motivated basis - because they are more precious than gold or silver, no doubt about it - but if only a very small portion of humanity actually sees them as truly precious, then they will be ruled by industrial demand. I guess the most important lesson to take home from this comparison of gold-silver/PGM's is that gold could be considered high priced on a preciousness/price ratio, but considered as a potential future currency it would have to be compared to the preciousness of pieces of paper, which would be about infinite to zero. If gold will be used as a currency, then there could be a slight chance that someone would want to use the PGM's as well... which would mean humongous price-appreciation - I wouldn't bet on it, but the prospect would definitely represent one of the largest gains ever - if it were realized.

I asked Bob Moriarty of 321gold.com for some thoughts on my post from yesterday, luckily for me he took the time to answer me and his reply was that I should put more definition and background into it. So, I'll give you something that I think will clarifiy alot of what I wrote yesterday:
Why was AIG so important to bail out? I think this question is crucial, because it reveals a big hole in the derivatives conundrum. When bankers wanted to free up more credit so they could increase leverage or pass on bad paper, they had to (actually, still have to) have a good credit-worthiness of that particular paper/asset. And the only way to get a good credit-rating on bad assets is through insurance! So, companies like AIG insured, for example, the sub-prime loans and when these bad papers became worthless AIG couldn't pay up their insurance because they had not expected such a big loss - or they simply choose to not expect it for short-term profit.

To not confuse anyone, the insurance is not generally refered to as an insurance, they are called CDS's (credit default swap) and handled like bonds and not like traditional insurance (so really anyone can be an insurer in this business). And let me also add that CDS's are not only used to insure 'bad paper', but also stocks like Lehman Brothers.

And then AIG was bailed out because they were so important to sustain credit-ratings and therefore the value of these worthless assets ... now who knows how much money the US government will have to throw away into this monster? By the looks of it, this thing is far from over; in fact, the derivatives market has grown since the bail-out! Maybe the bankers are using the little credit-worthiness the US still has to milk the cow as much as they can before the fraud is no longer sustainable.

I know alot of people have trouble understanding the derivatives market, and that's no big surprise since the bankers themselves are mostly clueless as well - in fact they usually don't even know what it is they're holding. How many times haven't we heard the same thing lately - some bank that has been untouched by "credit losses", declares itself completely free of these silly papers that all the other stupid banks are holding, and then a few months later they turn up millions (or billions) of so-called credit losses. Well, let's look at the big picture to try to get some clarity:

First there was the repeal of the Glass-Steagall Act of 1933 in the US, along with plenty of deregulation in the the rest of the world in the late 90's. Basically the repeal of the above mentioned act and deregulation in the world at large, was nothing more than to allow credit institutions to also be directly involved in investments. The problem here is that an institution that is able to create credit and also act as an investment company has the ability to create any kind of leverage it wants through derivatives or re-packaging of interest-rate yielding papers. These companies can use credit with investment vehicles in any way they want, and that's the reason that this regulation was created in the first place.
The derivatives market has completely exploded since this deregulation. In 1999 the derivatives market stood at about 50 trillion USD, today it stands at almost 700 trillion! The world economy is only worth something like 50 trillion today, soon to be less of course. This is simply telling you that the deregulation has created a completely out of control leverage in the system... the losses have only just begun, they keep coming in and there doesn't seem to be any end in sight.
The main problem here is that most derivatives that have been created rely on stability in the system, or a kind of financial status quo. We all know that basically there are no status quos in the financial industry, and so these financial instruments (if you will) are tuned into a narrow economic scenario ... and now that yields and values are jumping up and down - these derivatives become frozen or worthless.

Ok, that's the big picture, but how can we know how much of the derivatives market that is actually bad? Well, sadly I don't think that's possible but the size of the derivatives market is telling us that this must be alot of false value. You can't create 650 trillion of value in 10 years by manipulating financial papers and credit, something is definitely wrong here. This is mostly leverage... that is, fake prosperity, just like the "prosperity" you get by loaning money to buy crap you don't really need.

I don't know if that clarified anything to you? Then there's the problem of getting all the details right, maybe I'll try to delve into the different specimens of the derivatives waste-land some day when I have too much free time on my hands... oh, and here's a complimentary music video:

Lots and lots of bail-out money has been created all over the world lately, clearly the US is in a "superior" lead when it comes to bail-outs. Alot of well-informed people are saying that this will lead to very high inflation, which is very possible. But what is constantly missing in the inflationary descriptions is how exactly all this bail-out money is going to make it into the real economy. By the looks of it, the bail-out money has been moved into the banks, who have then started buying bonds (what else can they really do?) - and we have seen a very high demand for US-bonds since the bail-outs started. Basically, if the banks want to be/stay solvent they have to put their money in bonds (preferably US-bonds), so by this perspective there couldn't possibly be any high inflation since it's kind of a zero-sum game where the government hands out money and then gets it all back. But, there are of course other problems - all the US-debt that foreigners are holding doesn't look too attractive to hold in the face of this, although the trend of late is a "demand" for dollars - or the pulling out from smaller (or growing) economies by dollar-investors. Foreigners holding US-bonds want out and the imbalances that the beloved global economy and central-banking has created are going to bring everything crashing down (even further - then there's the derivatives market as a little bonus ... but that's for another post!). I think we will see inflation, but it won't come directly from the bail-out, only indirectly from those foreigners who have been lending money like there's no tomorrow to the US, and who are now forced to start spending those dollars until they're worthless.