One of the Most Important Commodity Charts We Have Ever Seen
Platinum hasn’t been this cheap in 20 years…
Right now, you can buy an ounce of platinum for $1,480. With gold trading around $1,620/oz, this means you can buy one of the rarest metals on Earth for almost 10% less than the price of gold…
Take a look at the chart below.
The chart above shows the price of platinum relative to gold. At today’s prices, you can buy an ounce of platinum for roughly 0.9 ounces of gold. You would have to go all the way back to 1992 to find a point in time where platinum has been this cheap compared to the yellow metal.
Historically, platinum prices have been 36% higher than the price of gold. That premium is to be expected, seeing as platinum is roughly 30 times rarer. To put it into perspective, all the platinum mined throughout history could fit in a single room less than 25 cubic feet.
See, like gold, platinum is used as a measure to preserve wealth. But unlike gold, platinum is more than just a hedge against inflation… it’s also one of the most important industrial metals of the 21st century.
Platinum’s most important industrial use is in automobiles. The metal is the key agent in catalytic converters that helps turn the toxic chemicals in your exhaust into less toxic substances.
Car production is projected to grow 5.5% this year, according to the global automotive industry. That up-tick in automobile manufacturing should support a 1% increase in the demand for platinum.
That might not seem like much, but seeing as platinum is already in short supply, that increase in demand could throw global platinum supplies out of balance.
That’s because roughly 80% of the world’s platinum supply is located in of South Africa. Mining companies in the region are constantly battling worker strikes… That’s one reason Barclay’s expects global platinum output to fall as much as 5.5% this year.
With demand rising and supplies dwindling, it’s not unreasonable to think that prices could rise to eventually trade at a premium to gold — just like they have historically. In fact, analysts are expecting platinum prices to touch $1,750/oz by the end of the year — a 21% increase from today’s price.
Risks to consider: Like most commodities, platinum prices are tied to the strength of the global economy. Therefore, expect volatility if economic growth remains stagnant.
Action to Take –> It costs roughly $1,400 to produce an ounce of platinum. With platinum trading around $1,480/oz, it is unlikely that platinum prices will fall all that much farther.
If you’re thinking about investing in platinum, then an exchange-traded (ETF) fund like ETFS Physical Platinum Shares (NYSE: PPLT) is a good way to go. It’s one of the easiest ways to gain direct exposure to the metal.
– Austin HatleySource: StreetAuthority