Marketwatch reports today on Platinum prices having more than doubled over the past four years, and that’s no surprise given that the white metal is more than 30 times rarer than gold.
Demand for it has kept pace with or outpaced supplies since 1999.
“Platinum is essential and precious,” and its use is growing, said R. Michael Jones, president of Platinum Group Metals Ltd., whose Web site touts the metal as “vital to the production of 20% of the world’s consumer goods.”
Platinum is everywhere — used in numerous applications for the auto, petroleum, and chemistry industries, and it’s a highly sought-after metal for jewelry.
Its price reflects its many uses — platinum costs twice as much as gold.
December gold finished at $463 an ounce Thursday, while January platinum futures closed at $925 an ounce — near the record $951 touched Oct. 12.
In keeping with that double value, analysts predict that as gold prices head for $500 an ounce, platinum may set its sights on the $1,000-an-ounce mark.
Both gold and platinum “have some real upside potential in the short and medium term,” said Paul Walker, chief executive of precious-metals consultancy GFMS Ltd. in London.
Ultimately, the best metals investment would be gold, in part because it’s “still an alternative to paper money,” said Peter Grandich, managing member of Grandich Publications, which publishes commentary on the mining and metals markets and other topics.
But “we’ve seen increased investment demand across the board in metals, and some of it finally spilled over into the platinum-group metals,” he said.
A true rarity
Recently, platinum prices have been climbing on the back of “reasonably strong” market supply and demand fundamentals and dollar weakness, said Walker.
In 2004 total world platinum supplies stood at 6.5 million ounces, but demand was 6.58 million, according to data from platinum experts Johnson Matthey.
Compared with 1999, that’s a nearly 34% rise in supply, but also an almost 18% climb in demand, Johnson Matthey data showed. See Johnson Matthey’s “Platinum 2005″ report.
The metal is “35 times rarer than gold and is geologically unlikely to be found in large amounts as a result of the ‘freak of nature’ process that concentrated it in the Bushveld Complex of South Africa,” Jones said.
Indeed, 75% of the world’s platinum is mined in South Africa, according to Sean Brodrick, the investment director for the Sovereign Society, a publisher of global investment opportunities.
The rest of the world’s platinum is mined in Russia, the United States, Canada and Zimbabwe, according to Johnson Matthey. And, all in all, there are fewer than 10 significant platinum-group-metal-mining companies in the world.
Platinum is ’35 times rarer than gold and is geologically unlikely to be found in large amounts as a result of the ‘freak of nature’ process that concentrated it in the Bushveld Complex of South Africa.’
The Bushveld Complex is the second most exclusive mineral real estate in the world — second only to diamond pipes, and they are spread all over the world.
By far, the bulk of platinum’s demand comes from the auto and jewelry industries, with about 40% of consumption originating from the manufacture of auto catalysts and 38% coming from the jewelry sector in 2004, according to a Johnson Matthey report.
Total demand in 2004 reached 6.58 million ounces, up 50,000 ounces from a year before, JM said.
Auto-catalyst consumption rose 7% in 2004 to 3.5 million ounces on the heels of growing European diesel-car production and by tightening emissions limits for cars in Europe and for heavy vehicles in Japan, JM reported.
“Diesel engines are becoming more popular due to higher energy prices,” and platinum can’t be replaced by palladium in those engines, said the Sovereign Society’s Brodrick.
Demand for platinum, especially in bridal category, is at an all-time high.
Meanwhile, jewelry demand fell by 12% to 2.2 million ounces last year, its lowest point since the late 1990s, JM said, as high and volatile prices in the first half of last year led to a “significant” fall in purchases from the Chinese jewelry trade.
But Antonia Camaano, a New York-based spokeswoman for Platinum Guild International, pointed out that, overall, “demand for platinum, especially in the bridal category, is at an all-time high,” with 81% of brides surveyed by the Fairchild Bridal Group indicating they wanted platinum engagement rings.
Platinum jewelry is 90% to 95% pure, compared with 18-karat gold’s 75% purity, she said. Platinum is also hypoallergenic and the densest precious metal in the market — well-suited to hold a diamond securely in place.