Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
US Economy Has Been in an Economic Depression Since 2008 - 22nd Oct 21
Extreme Ratios Point to Gold and Silver Price Readjustments - 22nd Oct 21
Bitcoin $100K or Ethereum $10K—which happens first? - 22nd Oct 21
This Isn’t Sci-Fi: How AI Is About To Disrupt This $11 Trillion Industry - 22nd Oct 21
Ravencoin RVN About to EXPLODE to NEW HIGHS! Last Chance to Buy Before it goes to the MOON! - 21st Oct 21
Stock Market Animal Spirits Returning - 21st Oct 21
Inflation Advances, and So Does Gold — Except That It Doesn’t - 21st Oct 21
Why A.I. Is About To Trigger The Next Great Medical Breakthrough - 21st Oct 21
Gold Price Slowly Going Nowhere - 20th Oct 21
Shocking Numbers Show Government Crowding Out Real Economy - 20th Oct 21
Crude Oil Is in the Fast Lane, But Where Is It Going? - 20th Oct 21
3 Tech Stocks That Could Change The World - 20th Oct 21
Best AI Tech Stocks ETF and Investment Trusts - 19th Oct 21
Gold Mining Stocks: Will Investors Dump the Laggards? - 19th Oct 21
The Most Exciting Medical Breakthrough Of The Decade? - 19th Oct 21
Prices Rising as New Dangers Point to Hard Assets - 19th Oct 21
It’s not just Copper; GYX indicated cyclical the whole time - 19th Oct 21
Chinese Tech Stocks CCP Paranoia, VIES - Variable Interest Entities - 19th Oct 21
Inflation Peaked Again, Right? - 19th Oct 21
Gold Stocks Bouncing Hard - 19th Oct 21
Stock Market New Intermediate Bottom Forming? - 19th Oct 21
Beware, Gold Bulls — That’s the Beginning of the End - 18th Oct 21
Gold Price Flag Suggests A Big Rally May Start Soon - 18th Oct 21
Inflation Or Deflation – End Result Is Still Depression - 18th Oct 21
A.I. Breakthrough Could Disrupt the $11 Trillion Medical Sector - 18th Oct 21
US Economy and Stock Market Addicted to Deficit Spending - 17th Oct 21
The Gold Price And Inflation - 17th Oct 21
Went Long the Crude Oil? Beware of the Headwinds Ahead… - 17th Oct 21
Watch These Next-gen Cloud Computing Stocks - 17th Oct 21
Overclockers UK Custom Built PC 1 YEAR Use Review Verdict - Does it Still Work? - 16th Oct 21
Altonville Mine Tours Maze at Alton Towers Scarefest 2021 - 16th Oct 21
How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
The Only way to Crush Inflation (not stocks) - 14th Oct 21
Why "Losses Are the Norm" in the Stock Market - 14th Oct 21
Sub Species Castle Maze at Alton Towers Scarefest 2021 - 14th Oct 21
Which Wallet is Best for Storing NFTs? - 14th Oct 21
Ailing UK Pound Has Global Effects - 14th Oct 21
How to Get 6 Years Life Out of Your Overclocked PC System, Optimum GPU, CPU and MB Performance - 13th Oct 21
The Demand Shock of 2022 - 12th Oct 21
4 Reasons Why NFTs Could Be The Future - 12th Oct 21
Crimex Silver: Murder Most Foul - 12th Oct 21
Bitcoin Rockets In Preparation For Liftoff To $100,000 - 12th Oct 21
INTEL Tech Stock to the MOON! INTC 2000 vs 2021 Market Bubble WARNING - 11th Oct 21
AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
Stock Market Wall of Worry Meets NFPs - 11th Oct 21
Stock Market Intermediate Correction Continues - 11th Oct 21
China / US Stock Markets Divergence - 10th Oct 21
Can US Save Taiwan From China? Taiwan Strait Naval Battle - PLA vs 7th Fleet War Game Simulation - 10th Oct 21
Gold Price Outlook: The Inflation Chasm Between Europe and the US - 10th Oct 21
US Real Estate ETFs React To Rising Housing Market Mortgage Interest Rates - 10th Oct 21
US China War over Taiwan Simulation 2021, Invasion Forecast - Who Will Win? - 9th Oct 21
When Will the Fed Taper? - 9th Oct 21
Dancing with Ghouls and Ghosts at Alton Towers Scarefest 2021 - 9th Oct 21
Stock Market FOMO Going into Crash Season - 8th Oct 21
Scan Computers - Custom Build PC 6 Months Later, Reliability, Issues, Quality of Tech Support Review - 8th Oct 21
Gold and Silver: Your Financial Main Battle Tanks - 8th Oct 21
How to handle the “Twin Crises” Evergrande and Debt Ceiling Threatening Stocks - 8th Oct 21
Why a Peak in US Home Prices May Be Approaching - 8th Oct 21
Alton Towers Scarefest is BACK! Post Pandemic Frights Begin, What it's Like to Enter Scarefest 2021 - 8th Oct 21
AJ Bell vs II Interactive Investor - Which Platform is Best for Buying US FAANG Stocks UK Investing - 7th Oct 21
Gold: Evergrande Investors' Savior - 7th Oct 21
Here's What Really Sets Interest Rates (Not Central Banks) - 7th Oct 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Will Platinum Be the Precious Metal Leader?

Commodities / Platinum May 01, 2019 - 03:08 PM GMT

By: The_Gold_Report

Commodities

Platinum, after making what appears to be a wash-out low in August 2018, now looks poised to be a precious metal leader, writes fund manager John Newell at Fieldhouse Capital Management.

What is Platinum:

Platinum is a precious transition metal that has the chemical symbol Pt and an atomic number of 78 on the periodic table. Platinum is grayish white in color and is often mistaken for silver. Platinum is derived from the Spanish word, platina, which translates to "small silver." Once considered a nuisance mineral, it was often discarded by early miners. Platinum is thirty times rarer than gold, with annual production of 6 million ounces per year, compared to ~100 million p/a ounces of gold, and 850 million ounces p/a of silver.


Chart courtesy of StockCharts.com.

Platinum Mine Supply:

There are less than 10 million ounces of aboveground platinum supply in the world; this compares to 165,000 tons of above-ground supply in gold. Currently platinum trades at ~70% of an equivalent ounce of gold, which is historically very inexpensive.

Platinum supply occurs naturally in South Africa (72%), Russia's Ural Mountains (11%), Zimbabwe (8%), the Western United States (6%), Colombia, China and Finland (combined 3%). It is often found in the presence of other metals from the platinum metals group such as palladium, ruthenium, rhodium, iridium and osmium. It can also be found near gold, silver, nickel and copper. In South Africa and Zimbabwe, platinum is mined as a primary metal, whereas it is produced predominantly as a byproduct of nickel in Russia. In North America, platinum is largely a byproduct of palladium mines.

Palladium's price premium to Platinum reflects the tight supply and current deficit supply deficit and highlights the potential for substitution, such as what happened from 1999 to 2002.

With palladium reaching new all-time, never-been-higher highs, due to the headline-grabbing announcements of deficits in 2018 that are likely to grow in 2019 to greater than 1 million ounces, suggests that palladium's growing demand and depleted inventories will keeping prices historically high in the short term.

In the past, as shown on the charts below, when palladium enters a deficit that is long lasting, with sustained higher prices, the market experiences substantial demand substitution. We have highlighted this price action, as cheaper palladium was substituted for more expense platinum in the late 1980s and reversed in 1999–2002 period (see chart below), as palladium was replaced by the less expensive platinum. However, as was the case in the same two time periods, rebalancing among industrial users takes time.

Chart courtesy of StockCharts.com.

Platinum appears to be breaking a long downtrend line and breaking out, that could be signaling and closing of the large gap between the two similar metals.

We believe that platinum could be in the same technical position we saw in palladium before it moved dramatically, hitting two of three projected targets, leaving the potential third target outstanding.

Chart courtesy of StockCharts.com.

Impala Platinum Holdings Ltd. (IMP:JSE) gave investors a clue that platinum could be turning here as shares in producing companies tend to move before the physical metals, as speculators want the leverage that comes with owning the company shares.

Chart courtesy of StockCharts.com.

Chart courtesy of StockCharts.com.

Platinum appears to be cheap, trading at ~70% of the price of gold, building a series of recent higher lows and higher highs, after a washout low in August 2018 that traded a slightly higher low than the 2008 financial crisis low.

Chart courtesy of StockCharts.com.

Demand for Platinum:

Platinum is a rare metal with distinctive qualities that make it highly valued across several diverse demand segments. Platinum's unique physical and catalytic properties have established its value in industrial applications. There is growing demand for platinum in industrial uses, jewelry and as an investment. Platinum is an essential industrial commodity and is used worldwide to manufacture about 20% of all consumer goods. We believe this demand will continue, as new uses for platinum are being discovered all the time, due to the metal's resistance to corrosion, high melting point, electrical conductivity and durability.

The primary demand comes from the automotive industry, and with continuing tightening of emission standards worldwide, this trend will continue. Platinum is also used to catalyze the electricity-producing conversion of hydrogen and oxygen into water in hydrogen-based fuel cells, with water and heat the only emissions.

Platinum is particularly well suited as a fuel cell catalyst as it allows the hydrogen and oxygen reactions to take place at an optimal rate, while being stable enough to withstand the high electrical current density and the complex chemical reaction that take place in a fuel cell, performing efficiently over the long term.

Platinum-based hydrogen fuel cell electric vehicles are expected to see rapid growth, as both Japan and China have stated that it is an important part of their current plans for adoption of fuel cell vehicles for long-distance trucking, public transportation, as well as fuel cell cars. China's fuel cell adoption plans alone could require more than 300,000 ounces of platinum per year. Japan, with its commitment to delivering the greenest Summer Olympics in 2020, is also making large investments in in platinum-based hydrogen fuel cell vehicles to transport athletes and spectators. In addition, the Tokyo Metropolitan Government plans to invest in 100,000 hydrogen cars, 100 hydrogen buses and build 80 hydrogen refueling stations by 2025.

Platinum is also used broadly in manufacturing of high-performance glass, which accounts for ~15% of demand, and this industrial use appears to be increasing. Demand from the glass sector has averaged ~200,000 ounces per year over the past five years. This durable and versatile metal helps in the process to make everything from smartphone screens to the high-quality fiberglass to make wind turbines and reduce vehicle weight, making them reach fuel economy targets.

Platinum, although still not as popular as gold and silver investing, has seen investment demand increasing as exchange traded funds, pension funds, mutual funds, and private investors are realizing how rare and collectable this durable metal really is.

How to invest in platinum:

Probably the safest way to invest in platinum is to physically own the metal. Although there are fewer platinum products available than gold or silver, there are still numerous ways you can invest in the metal. Platinum bars are a common investment, and these bars typically sell in smaller gram sizes. Coins are another common type of bullion, and a government mint such as the United States Mint or the Royal Canadian Mint both make these coins. Some examples of platinum bullion coins include Platinum American Eagles, Platinum Canadian Maple Leafs, Australian Koala Coins and Platinum Chinese Pandas.

There are pure-play platinum ETFs, platinum and palladium ETFs, and others that have weighting in the Platinum Group Metals.

Investors can purchase shares in platinum mining companies, both producing and exploration companies, that carry different risks such as nationalism, performance of management and employees, environmental risk, and the ability to find and produce the metal profitably.

Conclusion:

Platinum has been in an overall downtrend since 2008, with some brilliant roman-candle like moves in 2009 and 2016, only to burn out quickly and fall back to earth. However, we see this changing technically as platinum is breaking the downtrend that has been in for now more than 10 years. The biggest fundamental reason this may happen now is the palladium shortage, which may cause the substitution of palladium by platinum.

We feel that industrial and investment demand will continue drive platinum prices to higher levels over the next 9 to 18 months.

John Newell is a portfolio manager at Fieldhouse Capital Management. He has 38 years of experience in the investment industry acting as an officer, director, portfolio manager and investment advisor with some of the largest investment firms in Canada. Newell is a specialist in precious metal equities and related commodities and is a registered portfolio manager in Canada (advising representative).

Disclosures: 1) John Newell: I, or members of my immediate household or family, own shares of the following companies mentioned in this article: None. I personally am, or members of my immediate household or family are, paid by the following companies mentioned in this article: None. My company currently has a financial relationship with the following companies mentioned in this article: None. I determined which companies would be included in this article based on my research and understanding of the sector. Additional disclosures/disclaimer below. 2) The following companies mentioned in this article are sponsors of Streetwise Reports: None. Click here for important disclosures about sponsor fees. 3) Comments and opinions expressed are those of the specific experts and not of Streetwise Reports or its officers. The author is wholly responsible for the validity of the statements. The author was not paid by Streetwise Reports for this article. Streetwise Reports was not paid by the author to publish or syndicate this article. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security. Streetwise Reports requires contributing authors to disclose any shareholdings in, or economic relationships with, companies that they write about. Streetwise Reports relies upon the authors to accurately provide this information and Streetwise Reports has no means of verifying its accuracy. 4) The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports. 5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article until three business days after the publication of the interview or article. The foregoing prohibition does not apply to articles that in substance only restate previously published company releases.


© 2005-2019 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