Why Diversification Makes a Precious Metals Portfolio Stronger
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Why Diversification Makes a Precious Metals Portfolio Stronger

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Precious metals like gold, silver, and platinum have many things in common.

They tend to be heavy, durable, ductile, and malleable – all desirable traits for monetary metals. They also tend to be quite rare, which is part of the reason that investors have put trust in these assets as stores of value for hundreds of years.

Despite all these commonalities, the story of each individual metal is actually quite unique. Each metal is driven by its own set of supply and demand characteristics that are unique from the group. As a result, there is a significant amount of variance in the price patterns between each individual precious metal.

Precious Metals Diversification

Today’s infographic comes to us from Neptune-GBX and it showcases the story of each precious metal.

More importantly, it shows why owning them simultaneously is the only way to get exposure to the unique supply and demand drivers behind each of them in the context of the modern market.

Why Diversification Makes a Precious Metals Portfolio Stronger

The story of each individual precious metal is quite unique:

Gold
Investors and people buy gold bullion or jewelry as a store of value, and the gold price is sensitive to events in financial markets. Its main use is investment, and supply is diversified and global.

Silver
Silver is unique “hybrid” metal that is simultaneously driven by its investment and industrial uses. Its main uses are investment and industrial, and supply is diversified and global.

Platinum
Used in catalytic converters and for other industrial uses. Platinum demand also comes from jewelry and investment sectors. Platinum supply only comes from South Africa, Russia and Zimbabwe, giving it a unique set of supply characteristics.

Palladium
Palladium is a purer industrial metal than platinum, with 80% of demand coming from catalytic converters. It has similar supply issues to platinum.

Because each metal is different, when one increases in price, the others may or may not follow suit. This creates a problem and an opportunity for investors.

Why Diversification Matters

How do investors minimize the volatility of precious metals investments, while still maximizing returns?

It’s a risk management problem that portfolio managers have been dealing with for decades – and they’ve come up with a proven solution: diversification.

Diversification benefits:

  • Reduces risk: All eggs aren’t in one basket
  • Preserves capital: Protects against major declines in one asset
  • Generates returns: Portfolio can grow in boom or bust

Since the four major precious metals are driven by individual demand and supply factors, diversification can allow you get exposure to the unique drivers behind each metal at the same time.

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Mining

Visualizing the New Era of Gold Mining

This infographic highlights the need for new gold mining projects and shows the next generation of America’s gold deposits.

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gold mining
The following content is sponsored by NOVAGOLD
gold mining

Visualizing the New Era of Gold Mining

Between 2011 and 2020, the number of major gold discoveries fell by 70% relative to 2001-2010. 

The lack of discoveries, alongside stagnating gold production, has cast a shadow of doubt on the future of gold supply. 

This infographic sponsored by Novagold highlights the need for new gold mining projects with a focus on the company’s Donlin Gold project in Alaska.

The Current State of Gold Production

Between 2010 and 2021, gold production increased steadily until 2018, before leveling and falling.

YearGold Production, tonnesYoY % Change
20102,560-
20112,6603.9%
20122,6901.1%
20132,8004.1%
20142,9906.8%
20153,1003.7%
20163,1100.3%
20173,2303.9%
20183,3002.2%
20193,3000.0%
20203,030-8.2%
20213,000-1.0%

Along with a small decrease in gold production from 2020 levels, there were no new major gold discoveries in 2021. Meanwhile, annual demand for the yellow metal increased by 10%, up from 3,651 tonnes to 4,020 tonnes

The fall in production and long-term lack of gold discoveries point towards a possible imbalance in gold supply and demand. This calls for the introduction of new gold development projects that can fill the supply-demand gap in the future. 

Sustaining Supply: Gold For the Future

Jurisdictions play an important role when looking for projects that could sustain gold production well into the future.

From political stability to trustworthy legal systems, the characteristics of a jurisdiction can make or break mining projects. Amid ongoing market uncertainty, political turmoil, and resource nationalism, projects in safe jurisdictions offer a better investment opportunity for investors and mining companies. 

As of 2021, seven of the top 10 mining jurisdictions for investment were located in North America, according to the Fraser Institute. Here’s a look at the top five gold-focused development projects in the region, based on measured and indicated (M&I) gold resources: 

ProjectM&I Gold Resource, million ounces*Grade (grams/tonne)Location
KSM88.4Moz0.51g/tBritish Columbia 🇨🇦
Donlin Gold**39.0Moz2.24g/tAlaska 🇺🇸
Livengood13.6Moz0.60g/tAlaska 🇺🇸
Côté Gold13.6Moz0.96g/tOntario 🇨🇦
Blackwater11.7Moz0.61g/tBritish Columbia 🇨🇦

*Inclusive of mineral reserves. **See cautionary statement regarding Donlin Gold’s mineral reserves and resources.

Located in Alaska, one of the world’s safest mining jurisdictions, Novagold’s Donlin Gold project has the highest average grade of gold among these major projects. For every tonne of ore, Donlin Gold offers 2.24 grams of gold, which is more than twice the global average grade of 1.03g/t. 

Additionally, Donlin Gold is the second-largest gold-focused development project in the Americas, with over 39 million ounces of gold in M&I resources inclusive of reserves. 

Novagold is focused on the Donlin Gold project in equal partnership with Barrick Gold. Click here to learn more now

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