Platinum: The Other White Metal

By Justin Dove – September 1, 2011

Gold is in a bubble. The rise in prices has been more about speculation and fear than supply and demand. It’s anyone’s guess as to when the bubble will burst. But it will eventually, just like real estate and tech stocks did over the past decade or so. But the idea that gold has surpassed the price of platinum at any point is unbelievable. It will never last.

Platinum credit cards are better than gold cards. “Going platinum” in the music industry is better than having a gold record. Likewise, platinum is a better investment than gold. When investing in platinum, think of it as a precious metal that will take advantage of the same things that drive gold, but without so much downside risk. In the chart below, it’s obvious that platinum rarely falls to gold prices. When a platinum bubble burst in 2008, it quickly reverted to its average level above gold.

[Click to enlarge]

Gold vs. Platinum

So now that gold and platinum are about equal, platinum is the metal to invest in. If gold goes down, platinum shouldn’t go down quite as far. If gold goes up, platinum should eventually rise higher. Any breaches of platinum’s price will be short-lived.

Some may suggest that gold is more of a currency and safe haven than platinum. But those that honestly believe the world is going to fall to anarchy may as well invest in guns and lead. Those will be far more valuable than gold in a post-apocalyptic world.

Now those using gold as an inflation hedge due to debt concerns may have a better case. But platinum is a superior metal to gold for two major reasons: Industrial demand and scarcity.

Industrial Demand For Platinum Spikes

According to the Platinum 2011 report by Johnson Matthey, gross demand for platinum grew by 16 percent in 2010. This was mainly driven by a 48 percent spike in gross industrial demand, and 43 percent growth of demand in the metal for catalytic converters.

The increase was magnified by the sharp drop in demand following the global crisis in 2009. However, emerging market demand is expected to continue the industrial upswing. One of the biggest trends in emerging markets is automobile consumption. Platinum is a vital component of catalytic converters in all vehicles, but especially in diesel cars.

Europeans began incorporating more diesel engines in 2010. The diesel market expanded to 48 percent of all European cars in 2010. This helped platinum demand in Europe grow 51 percent.

Production of heavy-duty diesel trucks increased in the United States and around the world. The United States also increased emission standards for heavy-duty diesel in 2010, leading to bigger loads of platinum in the catalytic converters.

Platinum is used in a plethora of other industries including glass-making for LCD and LED televisions screens, hard disk drives, plating and thermocouples.

Maybe all these doomsayers are on to something and the global economy will grind to a halt. But, there’s still a reason that platinum will always be more valuable than gold in the long run. Platinum is between 15 and 30 times more scarce than gold. All the platinum mined to date is said to fit within a 25 foot cube.

Adding to the scarcity is how expensive it is to produce. High prices have supplies expected to increase slightly over the next few years. But there is an obvious downtrend in global supply and production over the past five years.

Platinum Supply by Region, 06-11

Eventually demand should outstrip supply and raise prices to astronomical levels. However, if the world does end in 2012 platinum will still be 15 times more scarce than gold. While it may not be used as a currency, it should still carry a higher value.

Alternate Ways to Invest

Adding to the demand and scarcity of platinum are new exchange-traded funds – the most popular is the ETFS Physical Platinum Shares (PPLT) designed to track the precious metal. These funds soak up physical platinum and assume the costs and responsibilities of safely holding the metal. They also command a price of one-tenth the value of an ounce of platinum. This, plus the convenience of not having to safely store the physical metal, makes it a very attractive investment for average investors.

It may also be wise to get exposure to top platinum mining companies. These companies will profit highly from increased margins due to higher platinum prices. Here are some notable companies:

  • The number one company in the production of platinum group metals is Anglo Platinum Ltd (AGPPY.PK). It has a market cap of $37 billion and profit margin of 24 percent. Anglo Platinum is a subsidiary of mining giant Anglo American Plc (AAUKY.PK). Anglo American has an 80 percent stake in Anglo Platinum.
  • Stillwater (SWC) is an American platinum mining company based in Montana. It has a relatively small market cap of $1.47 billion, but is trading more than 40 percent below its 52-week high. Once the profits start to roll in from these high platinum prices, Stillwater should experience some growth.

Even if platinum doesn’t go any higher, it shouldn’t fall as much as gold will. The spread between the prices should eventually revert to normal platinum premiums. While gold has many uses and values as currencies, the scarcity and industrial uses of platinum will continue to balance it higher than gold.

Disclosure: Investment U expressly forbids its writers from having a financial interest in any security they recommend to our subscribers. All employees and agents of Investment U (and affiliated companies) must wait 24 hours after an initial trade recommendation is published on online – or 72 hours after a direct mail publication is sent – before acting on that recommendation.

http://seekingalpha.com/article/291228-platinum-the-other-white-metal

Silver to reach $50 by 2011, and gold at $8,000 by 2015 conservative – Turk

I totally agree with mr. Turk’s targets for 2011, although I don’t think gold will reach $8000. Perhaps I am just too conservative; so I might have to change my point of view once we get to my initial targets of 1600-2000$.

Source: Mineweb.com

GoldMoney CEO, James Turk says surging physical demand for the metals is pushing them into backwardation and should see gold hitting $2,000 per ounce this year

After a record breaking run during the course of 2010 and, indeed, the last 10 years, gold took a breather in January.

Part of the reason for the decline was a movement out of gold by investors in Europe and the US who had bought the metal as protection against further declines in the health of the global economic system. Sentiment improved and investors began once more to look at other asset classes that perhaps would offer better returns, prompting some commentators to question whether or not it is time to get out of gold.

James Turk, CEO and co-founder of GoldMoney is not one of those commentators.

Speaking at the Mining Indaba in Cape Town, Turk reiterated his view that gold will get to around $8,000 an ounce by perhaps 2015 adding, “I would say though, having seen QE2, that my predictions will turn out to be on the conservative side.”

Speaking to Mineweb on the sidelines of the conference, Turk brushed aside concerns about a decline in investment demand for the metal, saying that one must be clear to differentiate between the paper market [like ETFs] and that for physical gold.

“What drives the gold price at the end of the day is the demand for physical gold. We’re seeing that clearly now in silver which is in backwardation going out to 2015. Money never goes into backwardation unless you reach a position where you have extreme conditions – and that’s what we see in silver now – the demand for physical metal is so much higher that people don’t want paper any more, they want the real thing.”

Turk believes this backwardation, the situation where the price of a commodity for future delivery is lower than the price for immediate delivery, could happen to the gold market.

“We could see gold in backwardation too as people become more and more worried about the inflationary consequences of the money printing that’s going on around the world. Silver always leads – in bull markets it leads on the upside and in bear markets it leads on the downside. Maybe as precious metals move into backwardation, silver is again giving us an important message that it is leading and gold will eventually follow.”

Asked his view of what is likely to happen over the course of 2011, he says, “We’re probably going to see $1,800 – $2,000 this year on the gold price and silver looks like it’s going to go to at least $50, given the way the backwardation is forming right now… The demand for physical metal is just absolutely huge and the paper market is being more and more discredited as a price discovery mechanism. As a consequence you’re going to see even greater demand for physical silver as we go forward.

http://profitimes.com/free-articles/92

Platinum to gold ratio and detecting bubbles

An article on BespokeInvest about the Platinum-to-Gold ratio today drew my attention.
I therefore wanted to get to know more about this ratio. I knew that the ratio had been trading around 2 over the last 10 years, which was why I invested heavily in Platinum and its little sister metal Palladium in December 2008 and early 2009 when prices crashed, and Platinum became cheaper than gold (the ratio thus dropped below 1). When the economy rebounded, the ratio rebounded to 1.50, but the last couple of months, it has been declining again, and is approaching 1 again, as it is currently at 1.13 with gold prices around 1546 and Platinum around 1742.
I thus started to dig deeper and found historical data at kitco.com
I created an excel sheet with monthly average prices since 1968 which is available for download HERE.

Below you can see some interesting charts that resulted of some calculations in the Excel sheet.
The first chart is the nominal absolute price difference between one ounce of Platinum and one ounce of Gold.
We can see that the difference was skyhigh early 2008, and then crashed. It went even negative for a couple of days (not shown in the chart, as this chart shows monthly averages), meaning that at some point gold was more expensive than Platinum:

The second chart shows the Platinum-to-Gold ratio since 1968, and shows how many ounces of gold you can buy with one ounce of Platinum. From this perspective, it looks like the Platinum-to-Gold is very low at the moment, just like the article at BespokeInvest stated. However, this chart might be misleading, as the huge spike in 1968 takes away all the attention.

I therefore removed the data until 1971 in the following chart, which gives us a clearer image of the period from 1972 until today:
As we can see, the ratio was as low as 0.75 in 1982 and as low as 0.73 in 1985 (see the excel sheet for more detailed information).
The average ratio between 1972 and 2011 was 1.36. We can also see that the ratio found “support” at 1.00 a couple of times.

Can we detect bubbles using these charts? Maybe. Let’s check it out.

The Platinum-to-Gold ratio topped twice around 2.35: once at 2.34 in January 2001 and once at 2.31 in May 2008.
At both times, a major economic crisis followed, causing the ratio to drop sharply.
The ratio bottomed at 0.75 in September 1982, after the Gold bubble had popped a year earlier. So who knows, maybe this ratio might help us next time spotting a bubble?

Where are we now? Hard to say, although a ratio of 1 has provided support in the past.
If we use some imagination, we can see similarities between the early ’70s and today:

For people who want more information about why people invest in Platinum, I think this article from CPMgroup from 1995 might be an interesting read.

 

http://profitimes.com/free-articles/sell-silver-as-gold-ratio-pointing-to-slump-says-barratt

Gold & Silver – Deep Correction Due? – Part 2

Published : August 29th, 2011 by Julian D. W. PhillipsGold Forecaster
The rise in the gold price has continued and shown a break up above the trend line. This has always been a sign that the gold, silver prices have ‘spiked’. This has always been a signal to be ready to take profits and be ready to go back in lower down.
 

This was a correct approach and we do not argue with the logic; however, a change is happening in precious metal markets. Over the last few weeks gold has run ahead but it has seen brief and shallow corrections until this last week when traders and speculators caused a ‘spike’ to $1.910, before an equally dramatic fall back to $1,716.   This is not the sort of correction we are discussing here.  The speed and extent of the correction did not reflect the market fundamentals.

 

So we must ask, “Are the current buyers also potential sellers?” In developed markets, the concept that an investor will not take a profit once his target price is reached seems ridiculous because it is believed that all buyers will be sellers when they have a good profit. But in the changed gold market of today buyers are not often sellers, as we know it.

 

Does the Developed World Still Dominate Gold Prices?

 

The ongoing uncertainty in the developed world, the lack of political leadership over financial matters –Angela Merkel telling all that governments should not be told what to do by markets, still—and overwhelming debt in the face of further economic downturns, points to demand for gold coming from the developed world; however, gold demand is lackluster there, at best.

 

Developed world investors are asking themselves…

 

Will the developed world debt and distress factors pushing gold higher be put right?

 

Are these the factors that are pushing gold higher?

 

Are the gold and silver price rises just about the developed world and its problems?

 

Has gold seen its top?

 

By past measures the gold price looks as though it should have a deep correction. The same was said when gold hit $500 after rising from $300 too.

 

 

There has never been a more important time to understand both the gold and silver markets. Those who followed our Alert bought gold at $1,555 and are still holding gold. The table to the left is the most definitive piece of evidence describing what is happening in the global gold markets.

 

Gold Goes Global

 

Gold went really global around five years ago. In 2009 central banks came in as buyers. These two factors have changed the gold market entirely; they have distorted the factors bearing on technical analysis and changed the way prices move now. In fact, the very nature of investors in gold has changed, and for good!

 

Of course the market looks as though it needs a major correction, if you look at it through the eyes of six years ago. If you believe the picture painted by the old criteria, you should sell gold and stay out until it drops back, but to where?

 

If you understand the new investors and how they think, then your conclusions should be different. Look at what has happened since June and note that while the risks in the gold market have risen, current buyers are not price chasers either. This fact alone should make you ask,

 

Are they likely to be sellers because of a swift rise?

 

What we have seen is a failure to follow prices up, but to wait until they pull back and for physical gold to be on offer. The new investor wants physical gold itself and is not so concerned with price. If they are right, sooner or later the price will rise to well above what they have paid. The lifespan of their investment is generations long, not days, weeks, or years long.

The conditions that have lifted gold from $275 to $1,900 continue to persist. The gold price is not about gold; it is about the bear market in currencies, the deteriorating confidence in the value of currencies, as well as developed world’s government’s ability to restore that confidence.

 

As these factors point to more of the same –expect a continuation in the fall of currencies against gold and silver to levels deemed incredible by the developed markets of the world.

 

Do you expect the value of currencies to rise? Do you expect a resurgence of economic health in the developed world? Do you expect strong government with the force and conviction to produce a reformed strong monetary system across a financially united world?

 

Asian View of Money

 

Asia has always had an inherent trust in precious metals; a trust, which has now been validated again and again over the last decade.  

 

Asian investors have never believed that paper money is a solid measure of value. When they see currencies weaken it is in line with the nature of governments. Is there a government whose money has lasted throughout its entire lifetime? When there has been, its money was gold and silver, and such money has lasted throughout most governments in history. Now, has there been a paper money based on a government’s obligations that has lasted beyond the life of the government?

 

It is this perspective of money that is critical to understanding

today’s gold and silver markets.

 

There is a point where confidence in paper money has sunk so low that a collapse is triggered. Governments will fight tooth-and-nail to prevent that from happening. When it does happen, it happens as fast as rebels entering Tripoli.

 

Central bank’s investment in gold is an insurance policy against such a collapse. People who have never been lulled into the developed world’s sophisticated monetary systems are not likely to be so, now that it looks so wobbly. The rise of gold and silver prices is about the fall of paper money.

http://www.24hgold.com/english/contributor.aspx?langue=en&article=3611713272G10020

 

Why Gold and Silver Prices Will More than Double Again Even From Current Prices

JS Kim  August 4th, 2011

Those that are familiar with my writings about gold and silver for the last six years know that I have said gold was cheap at $500, $600, $700, $800, $1000 and $1,200 a troy ounce and know that I have said silver was cheap at $11, $12, $14, $16, $25, and $30 a troy ounce. Today, I will reiterate that gold is still cheap in the $1500 to $1600 range and that silver is still cheap in the $40 range because the largest movements in gold and silver prices as well as gold and silver mining stocks have still not happened and will materialize over the next four to five years. Again, this doesn’t mean that gold and silver can’t or won’t correct or consolidate again in the future because both PMs always do. I have written publicly so much about this topic over the years (and even in much greater depth to my subscribing members) because I truly believe it is insanity not to participate in one of the best ways to invest in gold and silver today – the ownership of physical gold and physical silver.

 

Hundreds of millions of investors worldwide, influenced by the propaganda of Western bankers, have consciously made poor decisions not to own a single ounce of physical gold and physical silver today. One of the first realities an investor must understand about the gold and silver market is that the Economics 101 concept of price being set by physical supply and physical demand is an utter lie.  In today’s world of banking and financial industry lies, the price of gold and silver are NOT set by the physical demand and physical supply of either of these metals, but rather by the artificial supply and demand of paper contracts predominantly backed by no physical metal.

 

By now, the following facts are very well known by seasoned physical gold and physical silver buyers but likely still unknown to the average investor worldwide. A CPM Group document released in the year 2000 stated, “With the start of the London Bullion Market Association’s release of monthly trading data, the market has become aware that 100 times more gold and silver trade hands each year, just in the major markets, than is produced or used. Some market participants have wondered aloud how 10 billion ounces of gold could trade via the major markets each year, compared to 120 million ounces of total supply and demand, while roughly 100 billion ounces of silver change hands, compared to around 628 million ounces of new supply.”  Thus, one can see that the fraud perpetrated by bullion banks in the silver futures market exceeds even the fraud they commit in the gold futures markets.  Take the figures provided above, and a quick calculation reveals that bankers were trading nearly 160 times of paper ounces of silver every year than the annual physical supply of silver mined from the earth.

 

However, break down these numbers even more and the fraud becomes even more astounding.  While in 2000, about 628 million ounces of new supply of physical silver came to market, in 2010, mine production of new silver supply was slightly higher at 735.9 million ounces. Net government sales accounted for another 44.8 million ounces, old silver scrap provided an additional 215 million ounces, and producer hedging accounted for the final 61.1 million ounces. Thus a total annual supply of roughly 1 billion ounces of silver existed in 2010.  However, industrial usage, photography and jewelry used up nearly 78% of the one billion ounces of physical silver supply in 2010 and left less than 100 million ounces available for minting in the form of silver coins. (Source: The Silver Institute). Despite this tightness of new investment silver supply, there have been days in recent months when more than 250 million ounces of paper silver traded on the COMEX in less than one minute! During the times ridiculous volumes of paper silver were trading on the COMEX, usually the price of silver was plummeting in intra-day trading. Thus, bankers were clearly using this massive artificial supply of paper silver contracts to knock down prices.  On top of this fraud, bankers have stretched the landscape of imaginary supply of gold and silver with their introduction of the gold ETF, the GLD, and the silver ETF, the SLV, both of which started trading in 2006. Both the GLD and SLV are highly suspect, likely fraudulent vehicles that probably are either (1) only partially backed by physical gold and physical silver and/or (2) respectively backed by unallocated physical gold/silver that have multiple claims upon them. Again, fraudulent derivative paper gold and paper silver products create a perception of increased supply even when there is no REAL increase in the underlying physical supply or even at times when physical supply is shrinking. Bankers have created this mechanism specifically to suppress the price of gold and silver and to keep their Ponzi fiat currency scheme alive – a scheme that they utilize every single day to silently steal wealth from every citizen on this planet.

 

I have heard the criticisms levied against Eric Sprott and James Turk regarding their pro-silver and pro-gold stance in that they are just selling their books as PM fund managers and bullion dealers. However, I believe these criticisms to be patently unfair. I don’t believe that either Mr. Sprott or Mr. Turk are so enthusiastic about the future prospects of gold and silver returns because they just want to “talk their books”. Rather, I believe that they are so enthusiastic due to their deeper level of understanding about PM markets than the average retail investor and the vast majority of uneducated commercial investment industry advisers. Furthermore, I’ve been one of the most passionate supporters of gold and silver for the last decade and I have never acted as a bullion dealer, have never received any commissions from any sales of mining stocks, and have never accepted a single cent from any mining company to provide coverage of their company to my subscribing members though I have been approached many times to do so over the years.

 

To illustrate the level of misunderstanding that still exists about gold and silver prices, here’s one piece of investment “advice” that landed in my email inbox on August 16, 2008: “The barbarous relic – gold – is another good choice, usually. But gold has already appreciated from just over $300 an ounce six years ago to almost $900 today. It could be a little late.” This adviser went on to push stocks and confidently declared that stocks would be the “big winner” once again over the next several years. From August 16, 2008 until today, the S&P 500 has lost 2.92% while gold has risen +111.33% and silver, +284.47%. Stocks, the big winner? I think not. But selling stocks is the big bread and butter money winner of most commercial investment advisers so that is the primary reason why they overwhelmingly always push their clients into purchasing stocks as opposed to the real big winner of precious metals. I recall reading a newspaper article several years ago from a financial adviser in Florida that claimed she was proud of convincing here clients NOT to buy gold at $800 an ounce because the gold price was too expensive and that it was her duty to protect her clients against their own foolish impulses. On November 8, 2007, thousands of people that subscribe to my free newsletter read the following statements from me:

 

“So with gold over $800 an ounce, is it still cheap? Emphatically yes, and here’s why. I’m not really sure how all the ‘Gold at 27-year high’ headlines came to be, but… if we experience a correction any time soon, and gold breaks back down to the $720 level again before continuing higher, it will just be really cheap. Here’s why. Anyone that’s ever studied the formula that is used to calculate the Consumer Price Index(CPI)  in the U.S. knows that the formula has been greatly tinkered with over the years to produce absurdly low inflation numbers that are merely an artificially manufactured number that probably fits some pre-determined number the government would like to report.”

 

So back then, even with gold trading at $800 an ounce, the banker-owned and controlled media in the Western world was filled with stories about an imminent “gold bubble” collapse because gold was at a “27-year high.” It’s important to review history from time to time to be reminded how easily you may have accepted patently absurd proclamations about gold and silver prices in order to avoid falling victim to the same banker-originated and banker-spread propaganda today.  The reason I have been overly passionate about gold and silver for years and still am today is because it takes great passion to overcome the widespread ignorance and deceit spread by the commercial investment industry to their clients about gold and silver.

 

Let’s see how things have panned out in the stocks versus PM investment game over the past few years. From the launch of my Crisis Investment Opportunities newsletter on June 15, 2007 until July 25, 2010, in a little over four years, my newsletter has returned a cumulative profit of  +211.49%. Over the same investment period, the S&P500, the FTSE100, the ASX200, and top 5 ETF iShares Dow Jones EPAC Select Dividend Fund have respectively returned  -21.39%, -11.99%, -26.51%, and -2.69%. Furthermore, during the next four year period, from 2011 to 2015, I truly believe that an attainable goal for my Crisis Investment Opportunities newsletter is to double or even triple my previous four-year cumulative returns, simply due to the following three reasons:

 

(1) Western bankers are increasingly losing control over the price suppression schemes they have enacted against gold and silver through their creation of bogus paper derivatives;

(2) The conditions that have lead to Euro and US dollar devaluation are worse today than they were 10 years ago and no underlying fundamental problem of the 2008 financial crisis has been adequately addressed as of today; and

(3) The percentage of people that have the amount of faith I hold in gold and silver to produce superior returns around the world is still minute.

Thus, once the average Dick and Jane retail investor finally believe in the facts surrounding gold and silver versus the garbage propaganda disseminated by crooked bankers and ignorant advisers, the price of gold/silver and PM stocks will finally experience a truly parabolic rise.

 

Once a small percentage of retail investors worldwide, or even just a small percentage of retail investors in a densely populated country like China, finally realize that bankers have created insane massive paper supplies of artificial gold and silver backed by nothing but air and are consequently moved to purchase their first troy ounce of pure gold and/or pure silver, this very small action will exert tremendous upward pressure on the price of gold and silver. And once this happens, I hope that you will have already secured your physical reserves of gold and silver because it is then that PM prices will truly go ballistic.

 

About the author: In 2005, JS Kim walked away from the immorality of Wall Street to form his own fiercely independent investment research & consulting firm, SmartKnowledgeU. Freed from the deceit and massive restrictions of the commercial investment industry, JS has been guiding clients towards significant profitability ever since. Currently, JS is working on completing two short books that explain the fraud of the modern banking system in simple terms and plans to donate 100% of all profits from these books to orphanages in S. Africa, Vietnam, and Thailand. Visit us at http://www.smartknowledgeu.com to be informed of their release andFollow us on Twitter.

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http://www.theundergroundinvestor.com/2011/08/why-gold-and-silver-prices-will-more-than-double-again-even-from-current-prices/