Platinum has had an ambivalent history as a precious metal. While it has been used sporadically through the centuries, it only came to be seen as a metal with value in the 1800s. Initially considered inferior to silver by the Spaniards (calling it Platina, or “little silver” 1), this special metal has seen an increase in demand since WWII. 2
The Green Factor
While silver is known for its use in medicine and technology, platinum is the greenest of the precious metals. Since the 1970s the automobile industry has relied on platinum as the essential component in catalytic converters. These small devices fight air pollution and larger versions scrub the air in many industrial applications.
Demand for Platinum
Platinum is now a popular choice for specialty jewelry, and it is also being put to use in a number of medical applications. These and other factors, such as choosing platinum as a preferred investment asset, have combined to create a growing demand for platinum. For example, the very desirable Platinum Eagle coin has sold out quickly each year, and it was reported that more than 140,000 ounces of platinum were bought for investment in just the first three months of 2016. 3
In turn, world stockpiles have been decreasing for some time, with a projected decrease of 19 percent in 2016 alone. 4 This means that less than 2 million ounces of platinum will be available for its various uses.
A Growing Series of Buy Signals
Long-term traders and investors in precious metals accept the cyclical nature of all markets. When it comes to buying gold, silver and platinum, the opportunity to add to inventories at low price points is a time-proven method to maximize portfolio values.
Of course, the changing relationship between supply and demand of a commodity is one of the primary measures of market expectations. In addition to decreasing stockpiles, a number of other indicators are sending what experienced market analysts see as strong buy signals. 5 The impact of these factors is seen in the fact that platinum prices are up 23 percent for the year, and a hefty 5 percent already during September.
Potential Drop in Platinum Supply
In addition to growing demand and falling stockpiles, Joni Teves, of UBS notes another reason for a significant drop in supply. She speaks of the strong likelihood of yet another strike at the South Africa mines, the primary source for the precious metal. 6
This brings up another pressure for increased prices. Supplies from South Africa are priced in that nation’s rand. With an increase of over 10 percent for the year over the U.S. dollar, any further devaluation of the dollar will show up in hirer platinum prices.
Wise buyers of this precious metal, as well as gold and silver, will watch the market fluctuations over the near-term and watch for more buying opportunities. However, the pressures in the platinum market may well make those opportunities scarcer in coming months.