Interest in precious metals – particularly gold and silver bullion – has exploded in recent years. Precious metals’ prices have been tremendously resilient, and growth in comparison to traditional financial vehicles like savings accounts, CDs and stock investments, has been remarkable.
Investors however, often overlook the growing potential of platinum bullion, an oversight that may change in the months and years ahead according to a few of the reports we’ve seen.
A variety of factors, some exclusive to platinum, are combining for impressive growth capacity over the next few years.
So much so that platinum could conceivably outpace gold over the next few years!!
It all boils down to simply supply and demand
While supply and demand dynamics may seem like simple matters, the factors that comprise these two fundamental components of economic law can be very complex.
We’ll start with supply, and how issues with platinum supplies could dramatically affect prices…
As we discussed in our very first blog piece on platinum back in September, the metal is not considered to be “readily available”. Platinum is not necessarily being mined from every corner of the globe for example. In fact, according to a report we recently caught at CommodityOnline, mines in South Africa account for 80% of the world’s platinum production.
Both gold and platinum mines in S. Africa have experienced much disruption lately due to the worst labor crisis in decades. Violent clashes between police and protesters have ensued and tragically, miners have even been killed. This upheaval has caused major platinum producers to delay mining efforts and placed undue stress on supply factors.
This situation is also affecting gold mines of course, but S. Africa only accounts for about 1/10 of world’s gold production, so the impact to platinum production has obviously been more severe.
Next, demand…
Aside from being made into bullion coins like the American Platinum Eagle, demand is largely driven by industrial use, with the automotive industry being the primary recipient. Anti-pollution devices on autos, namely the catalytic converter, are partly made from platinum.
Emerging economies like China are seeing explosive growth in auto demand. It’s expected that demand for new cars in China will grow by 8% each year through 2020. Demand for SUVs is expected to rise by 13% annually in the next 8 years. While this is below the average growth rate from 2005-2011, it’s still what most consider to be significant demand.
Platinum, like gold, has been a store of value for nearly 300 years
Many factors, namely loose central bank monetary policies around the world, affect platinum in the same way they impact gold. Even though there is a lot of demand for platinum for jewelry and autos, the world economy is still painfully sluggish. Central banks, especially the U.S. Federal Reserve, have taken and continue to take unprecedented steps to jumpstart the economy.
The inflation associated with these measures has also led to higher platinum prices over time.
Another very significant difference between gold, silver and platinum, is scarcity. There is about 10 times as much gold, and 100 times as much silver in the earth than there is platinum according to figures on known reserves and supplies.
The platinum price though is still way down from its all-time high of $2250 per ounce in 2008, which is another factor driving some to predict that platinum may outpace gold in the coming years.
Resource analyst Jeb Handwerger of GoldStockTrades.com, says “Platinum is still [emphasis added] 20% below its pre-credit-crisis high, while gold and silver are approximately 80% higher.”
With all of these factors in play, investors may start to see more platinum bullion related news in the mainstream press in 2013 and beyond. Reports on gold and silver, even on the nightly news, have been more common in the last few years. We could very well see the same trend for platinum news.
By then though, it can be too late to really take advantage of a bull market. By the time news reaches the masses, the major moves have already occurred and the smart money has been spent.
Buying platinum bullion coins and bars now could very well prove to be the move of the decade, especially if the current trends continue.
You may sometimes see platinum products out of stock with supply being so tight. Be patient though, and check back often as inventories are being replenished regularly.
