More Precious than Gold
Last Chance to Buy Platinum
Over the weekend, platinum crossed above gold in price — $1,700 versus $1,690 — to reclaim its title as king of the precious metals.
The news is in step with one of my main investment theories for 2013: cars.
Investors are looking for a rebound in the global economy and, more specifically, they are betting on the auto segment.
I've read some nonsense that the rebound of platinum means Bernanke might end his stimulus efforts sooner than expected. This is not the case; the Bernanke has stated he will spend for another two years, or until unemployment is below 6.5%. I take him at his word.
Gold will continue to go up as global currencies race to the bottom.
Platinum, however, will go up faster.
Platinum is found in the process of mining gold sands and was used by the pre-Columbian Indians of South America for millennia. That said, it wasn't “discovered” by Western scientists until 1735.
Platinum coins were issued by the Spanish in the 18th century and continued by the Russian Empire in the 19th century.
Most platinum mines are in Russia, South Africa, Colombia, and the Western United States.
Similar to gold, platinum is a soft, dense, ductile metal that is highly resistant to corrosion.
Atomic Number: 78
Atomic Weight: 195.084
Melting Point: 2041.55 K (1768.4°C or 3215.1°F)
Boiling Point: 4098 K (3825°C or 6917°F)
Density: 21.46 grams per cubic centimeter
Platinum is used to make jewelry, wire, electrical contacts, and laboratory vessels. It is used in the manufacture of missile nose cones, jet engine fuel nozzles, and other devices that must work reliably at high temperatures for long periods of time. Platinum-resistance wires are used in high-temperature electric furnaces; platinum anodes are used in cathodic protection systems to prevent ships, pipelines, and steel piers from corroding in salt water.
But the biggest use of platinum is as a catalyst — which is why it is used in the catalytic converter in your car. Catalytic converters combine carbon monoxide (CO) and unburned fuel from a car's exhaust with oxygen from the air, forming carbon dioxide (CO2) and water vapor (H2O).
And as the standard of living grows in countries like India, China, and Brazil, car sales are increasing and environmental awareness is rising alongside them...
China is now the biggest auto market in the world, and auto sales in the United States are bouncing back strong. In the U.S., auto sales are expected to climb more than 10% — back to over 15 million units a year. More than 100 million cars will be sold worldwide by 2015.
All of these need catalytic converters.
I first recommended this mega-trend in price growth for platinum in a Wealth Daily in September 2011, when platinum was trading at 1,400 an ounce. But it's not too late...
More Precious than Gold
Platinum and gold are both considered precious metals, and prices often move in tandem. But demand comes from different places.
When investors think monetary policy is sending the world to a living hell of hyperinflation, coupled with a falloff in consumer purchases, they pile into the one true storehouse of value, gold.
When they think the auto market is coming back — as it is now — they jump into platinum.
That said, there is more to this story than potential growth...
As you remember, the brutal and violent strikes at South African mines have made production of platinum unprofitable. Anglo American Platinum (ZA: AMS), the world's largest producer, is closing two of its mines. This will cut production by 400,000 ounces, or 7% of the total.
This will push the supply-demand equation to the worse it has been since the mid-70s.
According to my calculations, there will be a 697,000-ounce shortfall this year — and that's without global auto sales outperforming.
In my Crisis and Opportunity trading service, we are betting large on the auto rebound, especially in China.
There is also room to start buying up non-South African platinum producers.
And if you don't have what it takes to make the real money, you can take the easy route and buy the physical platinum ETF (NYSE: PPLT).
All the best,
Since 1995, Christian DeHaemer has specialized in frontier market opportunities. He has traveled extensively and invested in places as varied as Cuba, Mongolia, and Kenya. Chris believes the best way to make money is to get there first with the most. Christian is the founder of Crisis & Opportunity and Managing Director of Wealth Daily. He is also a contributor for Energy & Capital. For more on Christian, see his editor's page.