Gold and Silver • Everyone Is Talking About Platinum

Everyone Is Talking About Platinum … But For The Wrong Reason
By: John Manfreda

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Over the past decade, gold and silver have garnered all the attention when it comes to precious metals. And, this is not surprising. In April of 2011, silver climbed to almost $50 per ounce. Not to be outdone, gold traded above $1,900 an ounce the following September.

Recently, another precious metal has stepped into the spotlight…platinum.

If you followed the news lately, you likely heard the mainstream press talking about minting a one trillion dollar platinum coin (containing less than one ounce of platinum), which would stay uncirculated in order to back U.S. treasury bonds. This stunt was suggested as a way to avoid painful discussions regarding the debt ceiling…as opposed to actually dealing directly with the debt issue and the hard decisions that come with it.

The idea generated numerous headlines, but it did not last long as the Treasury and the Federal Reserve claimed the one trillion dollar platinum coin was unrealistic. In the end, this amounted to nothing more than a political ploy. But, it did get people talking about platinum even if it was for the wrong reason.

The real reason to be talking about platinum is the potential benefit owning this rare precious metal can bring to your portfolio.

We believe platinum could be a great addition to your precious metals allocation because of the combination of its rarity and the current price anomaly – trading at a discount to or at par with gold for the past year and a half.

Platinum is 30 times more rare than gold. However, despite that fact, the price is currently almost on par with gold, even though it traditionally trades at a premium to gold. Going back to 1972, platinum has generally traded 1.35 times greater than the price of gold.

In order for you to understand how rare platinum is, you first have to learn the history and fundamentals of the metal. When it comes to gold and silver, people understand their use as money since the beginning of recorded history; there’s been enough gold and silver for liquidity purposes, but not so much the market is saturated. This allows these metals to maintain a stable store of value.

However, platinum is so rare that it is infrequently mentioned in the ancient history books. In fact, very little was known about platinum before the 1600’s.

The word platinum comes from the Spanish word "platina" – meaning silver. Platinum wasn’t even introduced to European scientists until the 18th century. 1751 was the year the human race finally found a way to actually melt this metal using arsenic.

In 1820, Colombia was the only known source of platinum, but as production declined there, a new source of platinum emerged. This source was found in the Ural Mountains of Russia. Russian mines became the principle source of platinum for the next 100 years. Today, Russia holds 13% of the global supply of platinum, and is the second largest producer of the metal.

Platinum was not widely used until the end of World War II. But, the first massive increase in the uses of platinum came in the petroleum industry. The use of platinum was introduced to this field so producers would be able to increase the octane rating of gas, as well as manufacture important petrochemicals such as plastics, synthetic rubbers and polyester fibers.

Platinum’s use in jewelry did not become accepted until 1960 in Japan. Since then, jewelry demand for platinum increased due to the purity, color and prestige of the metal. Today, jewelry is the second largest demand driver for this white metal.

Generally, when people think of the 1970’s, the last great bull market in precious metals comes to mind. Yet, during this time, another notable event occurred with precious metals that is rarely talked about. Specifically, I am referring to the use of platinum in the automobile sector. Today 33 percent of platinum’s demand comes from the automobile industry, constituting the largest demand segment for the metal. The use of platinum in catalytic converters allows vehicles to convert noxious gases into harmless byproducts.

These new uses paved the way for investor demand. Prior to 1980 platinum bars and coins were not available for investing purposes. Platinum was only sold in sheets made for industrial consumption.
Another demand driver for the use of platinum is for medical uses. Currently, platinum is used to help fight a wide range of cancers. Platinum is also being used frequently in biomedical devices due to platinum’s inertness and electrical conductivity.

Last year, Asset Strategies International (ASI) published this Alert about the rare opportunity platinum presented since late September 2011. Since then, platinum has risen in value almost $150 per ounce, despite market volatility. ASI recognized this opportunity due to the rare ratio in which platinum was trading to gold. Platinum was trading at a $150 discount to gold at the time.

The good news is, it’s not too late for you to capitalize on the opportunity in platinum. Currently, platinum is trading at an almost even 1:1 ratio with gold, still below the historic average of 1.35 times the price of gold. Platinum has also generated new headlines because of major supply shortages and labor unrest at platinum mines in South Africa. As a result, there is the possibility new demand along with increasing supply stressors may drive it past the traditional gold to platinum ratio.

If you follow the recent events in South Africa, you may be familiar with the news of the mine strikes. Currently, 73 percent of the world’s platinum production comes from South Africa. Just a couple weeks ago, Amplats in South Africa announced they would close several mines, leaving 14,000 workers unemployed. Amplats supplies 40% of the world’s platinum demand, yet they are shutting down mines at an alarming rate. Four have shut down as of January 15, and another mine is pending closure.

Due to the harsh conditions of platinum mining in South Africa, the miners are demanding higher pay and benefits. In turn, production costs are climbing for the world’s leading producer. In any business, cost increases usually precede (and lead to) price increases. And, the platinum industry is not immune to supply and demand fundamentals.

If you look at the main demand drivers and uses mentioned previously, all of them demand drivers are increasing. Combine this with a decreasing supply in South Africa where 73 percent of the worlds known production is located, and you see the opportunity we see in platinum right now.

Platinum is a real alternative investment option.

At ASI, we are not financial advisors, but we are in the business of helping you Keep What’s Yours. While we cannot say we know what is going to happen for sure, we think you can agree, the platinum story is one worth telling…and worth acting upon.

So, how can you get some platinum?

Here are a few simple options…
1.Direct physical ownership –
2.Perth Mint Certificates – Purchase 100% government guaranteed and fully insured platinum in the form of unallocated bullion. For over a decade and a half, Perth has offered this safe, cost-effective method of platinum ownership to investors just like you.

Statistics: Posted by DIGGER DAN — Fri Jan 25, 2013 2:37 am