[Note: Kris is in Australian Wealth Gameplan mode this morning. So today's effort is brought to you by Diggers & Drillers editor Alex Cowie...]
Platinum has the makings of being the commodity story of 2010. Right now, the stars are aligned for this super rare metal, and this year I expect it will even outperform gold and silver.
Over the last three months Platinum prices have already risen 15.8%. And that’s set to continue.
So why are investors worldwide getting so excited about platinum? Let me tell you.
First of all, the supply of platinum is really tight.
When the world asks for more of the stuff, the industry is stuck in first gear and just can’t increase the supply. For instance, it’s taken the industry thirty years to just double production.
This is partly because it’s so rare. For every trillion particles in the earth’s crust, just three parts of them are platinum. Last year the entire industry managed to squeeze out just six million ounces, which would fit in a box measuring two metres on each side!
Second, demand is rising fast.
The four main groups of users take everything the industry can provide already. With demand rising, a global platinum deficit is on the way.
Autocatalyst manufacturers are the most notorious users of platinum, but last year they used just over a quarter of the supply. Between them and other industrial users, such as computer hard disk manufacturers, they bought about half of global platinum supply last year.
If the global economy continues to recover, these two groups will need more platinum.
Funnily enough, the biggest users of platinum were jewellery manufacturers. They took up 42% of supply last year.
They mopped up what other industries didn’t need that year.
And now the world has got an increasing taste for platinum jewellery. The Chinese platinum market is in its early days but is taking off fast. This has the scope to be a huge destination for the world’s platinum.
But the most exciting source of platinum demand by a mile is the new kid on the block – the Exchange Traded Funds (ETFs).
Between 2006 and 2009 they have gone from zero, to ten per cent of the market. They buy the metal and hold it on behalf of investors. The Investors can then buy a portion of the platinum, like they were buying a share in a company. It’s an easy way to invest directly in the metal.
For example, Gold ETFs do this and have been a massive winner. The one on the New York Stock Exchange has now got the sixth largest gold holdings in the world.
And platinum ETFs are also growing rapidly. A new platinum ETF (ETFS Physical Platinum shares) listed on the New York Stock Exchange earlier this month.
Investors buy in for one reason – they expect future price rises. This new ETF has been given a whopping seven percent allocation of the world’s platinum supply.
This is game-changing news for two reasons.
Firstly there isn’t a spare seven percent to go around. It’s just not there.
Secondly the ETF puts a massive investor base in front of the platinum market which is basically miniscule. It’s just a tenth of the size of the gold market which in the big picture is also tiny.
So ETFs will mop up at least 17% of the market this year. If the new ETF is a success, it will grow and others may follow its footsteps.
Make no mistake; demand for platinum is on the rise.
So we have the makings of a perfect storm:
- Super-tight supply.
- Rising demand from multiple users.
This is exactly what I’m always searching and hoping to uncover for Diggers and Drillers readers: A commodity right in the centre of a perfect storm.
In mid-December, platinum was ticking all the boxes and then some. So, I tipped a stock that was well placed to reap the benefits. Already, Diggers & Drillers readers that acted on the tip are already enjoying fifty percent gains on their investment within a month.
From where I’m sitting, platinum looks like it is going to have a great ride well beyond the end of this year as well. Even before the new ETF burst onto the scene, there was already a forecast platinum shortage for the next few years. The ETF will only multiply this shortage.
And where there’s a shortage there’s a price rise.
Regards,
Alex Cowie
Editor, Diggers & Drillers
60-Second Market Round Up
by Shae Smith
The S&P/ASX 200 was boosted after the announcement of a lower than expected unemployment rate. Unemployment was down to 5.5%. The index closed up 29 points to finish at 4,898.00.
The Dow Jones Industrial Average had a shaky start based on disappointing December retail results. The market was expecting a 0.50 increase and instead the results showed a 0.3 decrease in spending. Thanks to the technology sector, the Dow managed to close up 0.28% and finish at 10,710.55. Read more here.
Overnight in the UK, the FTSE added 0.45% to close at 5,492.20 despite a weak retail sector. Mining companies, like Xstrata [FTSE: XTA] ended the day 4% higher which helped the index finish in the black.
The Nikkei posted its highest close in 15 months, ending the trading session at 10,907.68, up by 1.61%. Panasonic Corp [T: 6752] was up yesterday by 6.10%, based on hopes of a positive earnings season in the US. Find out what else drove the Nikkei here.
The price of spot gold in Australian dollars is trading at $1,225.87 while in US Dollars it is trading at $1,141.90. The price of silver in Aussie dollars is $20.05 and in US Dollars it is $18.67.
The Aussie dollar versus the US dollar is trading at USD$0.9316, and against the Japanese Yen JPY84.96
Crude Oil has continued its yo-yo like pattern. High stock levels and a sharp decrease in demand are the drivers behind the overnight decline. Crude Oil closed at USD$79.19
For the biggest movers on the market yesterday click here…
