Platinum soared to a fresh three-month high Tuesday, rising
for six sessions straight. The white metal's price eclipsed gold
for the first time since March 2012.
In the futures market, platinum prices surged 1.69% to
$1,693.00 an ounce. Gold prices added 1.03% to $1,686.00 an
Platinum has been outshining gold and silver the past month,
and strong evidence suggests a brighter future lies ahead for
it.ETFS Physical Platinum Shares (
), the largest ETF tracking the precious metal, has jumped 9.45%
year to date. That's whileETFS Precious Metals Baskets Trust (
), tracking gold, silver, platinum and palladium, added 2.2% over
the same period.
Platinum traded at an average price of $1,561 an ounce last
year. The metal's average price will increase 11% to $1,738 an
ounce this year, according to Bank of America Merrill Lynch's
"2013 Metals & Bulks Outlook" released in late November. Its
analysts expect a production shortfall this year owing to work
stoppages in South Africa, stagnant Russian output and higher
demand from jewelers and the auto industry.
Here are five reasons why platinum could be better bet this
year than gold and silver and may be of interest to
1. Platinum bullion and miners are outperforming their gold
and silver counterparts in the short run and past year.
ETFS Physical Platinum Shares jumped 6.6% in the past week,
while gaining 4.2%in the past month and 2.8% in the past three
SPDR Gold Trust (
), the main proxy for gold bullion, added 1.6% in the past week,
while sliding 0.6% and 3.1% in the past month and three months,
In the past year, PPLT added 12.5% while gold eked out a mere
IShares Silver Trust ETF (
) gained 3.6% in the past week, while diving 2.4% in the past
month and 3.9% the past three months. It rose 5.6% in the past
Going out five years, platinum was the underdog. It's been
flat, while gold returned 25.7% and silver 33.7%. So platinum
could be due for a reversion to the mean or catch-up trade.
PPLT is trading above both is 50- and 200-day moving averages,
showing it's in a solid uptrend. By contrast, gold and silver are
trading below the 50-day line and toeing back and forth over the
200-day line, which is very weak price action.
Gold miners and platinum miners both lost 15% and 13%,
respectively, in the past year. But in the short-run, platinum
miners have taken a lead over gold miners.
First Trust ISE Global Platinum Index (
) rallied 9.0%, 17.2% and 23.9% the past week, month and three
By contrast the flagshipMarket Vectors Gold Miners ETF (GDX)
added 2.6% that past week. It lost 1.39% and 11.3% the past month
and three months.
Platinum miners are also outpacing silver miners.Global X
Silver Miners ETF (SIL) fell 0.36%, 3.1% and 7.7% over the past
week, month and three months.
"If one accepts the premise that the global economy will
recover in 2013, then (platinum) would benefit from increased
automobile production," Christopher Blasi, president of
Wilmington, Del.-based Neptune Global Holdings, a precious metals
dealer, said in an email. "This argument is particularly
compelling in light of Russia's decreasing inventory of palladium
and ongoing disruptions at South African platinum mines."
2. Healthy auto sales will drive demand for platinum, a key
component in catalytic converters, which accounts for 40% of
Platinum is a precious metal that also has industrial uses in
autocatalysts as well as in areas where gold is also used:
electronics, medical and dental equipment. Other industries make
up 22% of platinum demand and jewelry 32%.
The seasonally adjusted annual rate of sales (SAAR) for U.S.
autos totaled 15.2 million in November. JP Morgan estimates the
SAAR for auto sales will climb 5.3% to 16 million this year with
the help of easing credit standards.
"The average vehicle life has extended significantly since
1996, rising from 8.7 years to 10.8 years (currently)," JP
Morgan's analysts wrote in a "2013 Equity Outlook" report
released in December. "The current level of auto sales works out
to about 49.7 cars per 1,000 adults, still quite low.
Historically such a level of sales has been associated with
troughs in auto demand."
China's auto sales could grow 7% to more than 20 million units
this year, owing to economic growth and urbanization, Bloomberg
China's current car-ownership rate of 44 per 1,000 pales in
comparison to the global average of 135 and a U.S. average of
"The long-term outlook is second to none," Scotiabank analysts
wrote in a client note.
BofA Merrill forecasts total global auto sales will rise 5.6%
in 2013 and 4.1% in 2014.
"However, as the (platinum) price rises it also becomes more
lucrative for recyclers, who often hold on to their positions to
liquidate at higher prices," Miguel Perez-Santalla, vice
president of precious metals exchange BullionVault.com, said in
an email. "How much are they holding and how much more will come
to market as the prices rise? This is a big guess. However, year
upon year projected short falls in both platinum and palladium do
not seem to come to fruition. Why is that? I believe it is the
increasing supply of both metals from recovery of existing
auto-catalyst and thrifting by manufacturers."
3. Mine strikes and turmoil in South Africa -- the world's
biggest producer -- has hampered production.
BofA Merrill estimates 340,000 ounces of platinum production
has been lost because of mine strikes.
"Taking these losses into account, we forecast the market has
moved into a deficit (35,000 ounces), compared to our previously
forecast supply overhang at 305,000 ounces," BofA Merrill
analysts wrote. "As a result of the slow buildup at Anglo
Platinum and Lonmin, we forecast a deficit of 236,000 ounces by
4. Mining companies may cut production because of high
operating costs and low profits.
BofA Merrill estimates that mining firms are losing money on
about 45% of their production because of mine strikes and rising
"Today's prices are below per-ounce cash costs for much of the
world's mining operations for platinum and palladium, and mining
costs will be rising with the recent union agreements in South
Africa," said Tom Winmill, manager of Midas Fund, which invests
mainly in precious metals miners and bullion. "Production in
South Africa has fallen in each of the last five years and will
likely continue, due to increasing mining difficulty, political
challenges and deferred mining infrastructure buildout."
5. Renewed growth in China could boost demand there, one the
world's biggest consumers of platinum jewelry.
China accounts for 23% of the world platinum jewelry demand,
according to Robin Bhar, head of metals research at Societe
Generale. Any slowdown in Chinese demand could offset the
shortfall from South Africa's supply disruptions, he told
Only about 5% of China's platinum demand comes from the auto
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