Platinum: A Stronger Safe Haven than Gold?
Source: Seeking Alpha, Julian Murdoch (10/19/09)
". . .since the beginning of the year, platinum's price has gained more than 50%. . ."
But on a year-to-date basis, another precious metal has quietly outshone gold's returns: platinum.
Platinum is both an industrial metal and an investment vehicle, used to make jewelry, construct automobile catalytic converters and as a safe haven for bullion investors. According to Platinum Today, in 2008, miners across the globe produced 185.7 metric tons of platinum, but consumers used 197.4 metric tons—a deficit of 11.7 metric tons.
That deficit was a result of a supply-side shock. Power shortages in South Africa, where the majority of the world's platinum is mined, caused severe interruptions in mining operations.
Last October, both metals took a beating due to the financial crisis, and their prices had started to converge. Platinum was the harder hit, dropping 68% off its record to strike a 5-year low of $744.25/oz. on Oct. 27, 2008. Gold fared slightly better, hitting its low of $705 weeks later.
Since then, both metals have recovered from their low. But platinum in particular has taken off; since the beginning of the year, platinum's price has gained more than 50%, reaching a high of $1,367.90 last Tuesday:
But not all of platinum's outperformance can be traced back to safe-haven investing. As with most things in the commodity world, China has also influenced platinum's recovery.
In H109, demand for platinum jewelry in China went up 81% YOY. That's a big deal, as China is said to account for over 60% of the world's total platinum jewelry demand.
Japan has also regained its appetite for platinum jewelry, with sales of new metal up 500%. Granted, that number is so large only because the starting point is so low; Japan recycles a lot of its old metal, so any increase in demand for new platinum inherently carries a big percentage increase.