At MoneyNews: Rethinking Platinum as a Commodities Investment

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Rising auto sales, shrinking platinum inventories and a South African miners’ strike could boost platinum prices this year.

Platinum is a rare precious metal. Not much of it is known to exist and only a few hundred tons are mined each year. Much of that production goes toward industrial uses, of which the primary one is for catalytic converters in cars.

Worldwide car sales have been in a slump since the global economic recession began in 2008, but mining platinum has continued. That means big stockpiles of platinum, which has pushed prices down. But with many countries’ economies slowly improving, car sales are slowly improving, and platinum inventories are starting to decline.

Declining inventories have been exacerbated by several labor strikes at platinum mines in South Africa. South Africa has the largest known platinum reserves in the world. The second-largest producer of platinum in the world is Implats. The company is concerned that because of the strike at their mines, they only have enough platinum inventories to supply customers through March.

Because platinum is used primarily for industrial uses, its price typically is more volatile than gold is, and prices goes up and down depending on indicators of an economy’s health. The indicators suggest that the world economic recovery continues to be modest and fragile, with mixed data from each country.

There will likely be lots of hiccups along the way. But the world economy is better off today than it was in 2008. This, coupled with potential platinum supply issues, shows the situation in the near future may have some opportunities for the astute investor.

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