Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Why Platinum May Outperform Gold and Silver

Commodities / Platinum Oct 26, 2012 - 11:45 AM GMT

By: Jeb_Handwerger

Commodities

Best Financial Markets Analysis ArticleWe are seeing some healthy profit taking in gold (GLD) and silver (SLV) after making an explosive breakout over the summer. Investment demand after QE3 is increasing as investors seek alternatives to fiat currencies which are being devalued by Central Banks all over the world.


We may see consolidation and volatility in the markets until after the U.S. Presidential Election, when most investors realize that not much will change. All over the world governments are looking to boost unhealthy economies and this will continue regardless of who is in office.

Major infrastructure projects will probably be announced after the election both in the U.S. and China to boost employment. Additional means to boost the velocity of money and encourage risk on investments will be promoted by punishing hoarders of cash and treasuries.

In addition, we have serious supply concerns as the majors delay large mines and South Africa one of the largest producers of gold, platinum (PTM) and palladium (PALL) is facing the worst and most violent labor crisis in decades. This will not end quickly and may continue to plague the South African mining industry. This will not only put pressure on the supply of gold, but could cause platinum to spike as more than 80% of the world's supply originates from this questionable jurisdiction.

A Recent CBSMarketwatch interview where I was quoted stated:

"…Jeb Handwerger, a natural-resource analyst and editor of GoldStockTrades.com, said that reduced supply from South Africa, combined with rising investment demand from emerging markets, could spur platinum prices to outpace gold.

"Platinum is still 20% below pre-credit-crisis highs, while gold and silver are approximately 80% higher," he said. "This deviation from historical means will not last forever….Meanwhile, gold output in South Africa is a worry too. As of mid-October, strikes among Africa's largest gold producers have cut the nation's gold production by half, according to Bloomberg."

Read the full article on CBS Marketwatch by clicking here…

We stated for many years that investing in South Africa may be a risky proposal and it was no longer a mining friendly jurisdiction. Over the summer we initiated coverage on two North American platinum and palladium as we believed the tumultuous situation in South Africa with violence would escalate and platinum/palladium prices would breakout. Since the strike gold jumped from $1600 to $1800 and platinum jumped from around $1400 to $1700. Now it has pulled back to strong support.

In August the Marikana Miners walked off the job to protest low wages and poor working conditions. Over 36 strikers were killed. This was the most violent clash with police since the early 60′s.

The strikes have spread all across South Africa. Many major gold and platinum companies were already dealing with lower production and higher costs. This turmoil is already putting more pressure on the supply side of platinum and increasing demands coming from the growth of the auto industry in emerging nations.

Platinum producers such as Lonmin who owns Marikana have had to deal with a low platinum prices and rising labor costs as platinum is $100 below the price of gold. Before the credit crisis platinum was more than double the price of gold. Since that time, the South African strikes are continuing to be a major thorn in the side of the South African miners such as Anglogold Ashanti (AU), Gold Fields (GFI), Harmony (HMY), Impala (IMPUY) and many more.

The workers have refused pay raises and it does not appear that the strikes will be ending anytime soon. Do not forget that working conditions in South Africa are much more challenging than other regions as miners descend to much greater depths underground where ventilation is a major concern.

Remember in 2007, over 3000 workers were trapped underground. This led to some mines being shut down including one of the nations largest gold mines. South Africa used to represent over one third of gold production in the early nineties, now it is probably close to a tenth.

This implies that new discoveries around the World will need to make up for this decline. In addition to supply pressure on gold, South Africa is the third largest exporter of coal. But the real concern right now is platinum. Remember South Africa supplies about 80% of platinum to the world.

Platinum supply is only a tenth of gold and a hundredth of silver . Platinum is not only a monetary metal, but it has a strong connection to the automobile and jewelry industry which is showing increased demand especially from emerging nations.

General Motors sold more cars and trucks in China this past year than in the United States for the first time ever in its 100+ year history. This signifies the fundamental shift in demand coming from the rising middle class in China. This rise in demand will need increasing supplies of platinum and palladium which is used in the catalytic converters to reduce noxious air emissions.

The reduced supply from South Africa combined with increased investment demand for platinum coming from the emerging economies could spur the platinum price to far outpace gold.

It's time for our readers to pay attention to platinum as it begins to receive more notice from the mainstream media. Platinum is still twenty percent below pre credit crisis highs while gold and silver is approximately 80% higher. This deviation from historical means will not last forever.

Gold and silver have gained investor's attention as a store of wealth, while platinum has been significantly overlooked and undervalued. The public is still viewing platinum as an industrial metal disregarding the fact that platinum has a history of being used as a store of value for over 300 years. Many still do not realize that platinum is 30 times rarer than gold, yet currently it is trading more than a $100 cheaper than gold.

During good economic times platinum has been usually double the price of gold. Before the credit crisis, platinum reached a high of $2252 when gold was below $1000 an ounce. Despite current pricing, demand especially from emerging nations has far outstripped supply for many years. Now that South Africa which controls more than 75% of world platinum supply is in danger, the rarest precious metal may soar outpacing gold.

We believe very strongly in diversifying across the metals universe to reduce volatility. Portfolios should include not just gold, but silver, platinum, uranium, rare earths, copper and other critical metals needed for emerging, modern industrial nations. We may see gut wrenching inflation due to historic monetary accommodations.

In such an environment where we transition from deflation to inflation, platinum may outperform. This may be the beginning of the outperformance of platinum over gold. Platinum's inflation adjusted high is around $3000. It is trading now below $1650. Given the global currency debasement, platinum could double from these levels to just keep pace with gold and silver. The reason platinum is not the flavor of the day is that it is not yet as liquid as gold and silver.

Major hedge funds and large banks have not participated yet. Once they enter the arena…watch out for an explosive move. Now it is time to Look For Platinum Projects In Mining Friendly Jurisdictions. The implications of the South African supply crisis will accelerate investments in politically stable platinum projects which we continue to highlight.

Subscribe to my free newsletter to get up to the minute updates on rare earths, uranium, gold and silver.

By Jeb Handwerger

Disclosure: I am long GLD, SLV. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

http://goldstocktrades.com

© 2012 Copyright Jeb Handwerger- All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in