Feb 11 2002
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Platinum, with its unique physical and chemical properties, is used in a wide variety of industrial and environmental applications. It is also regarded as one of the finest, among all jewelry metals. More than 20% of all consumer goods either contain platinum or are made using platinum.
As a result, the continued growth of advanced and developing economies has led to a demand for this metal to escalate at a quicker pace than it is being mined.
The Most Precious Metal
Platinum is considered the rarest of all precious metals. Approximately 90% of all platinum supplies come from Russia and South Africa, and almost all of the platinum mined in South Africa is pre-sold to industrial consumers.
Contrary to gold and silver, there are no large above-ground platinum supplies to make up for the gap against major supply disruptions. About eight tons of raw ore has to be mined to obtain just one pure ounce of platinum. Currently, the finest and most sophisticated jewelry contains platinum.
Multi-Purpose Industrial Metal
Platinum is essential for the production of around 20% of all consumer goods. Many industries depend on platinum because of its unique physical properties.
Gasoline, LCD displays, anti-cancer drugs, eyeglasses, fiber-optic cables, explosives, hard disk drives, paints, fertilizers, and pacemakers, all depend on platinum. Platinum is also the main catalyst used in fuel cells.
Japanese consumers purchase about 48% of the world’s platinum jewelry every year.
The demand for platinum in high technology applications is rising because of its unique properties: It is highly conductive, almost resistant to corrosion, a robust catalyzing agent, and has a melting point of 3215 °F.
An Environmental Metal
More than one-third of all platinum supplied to the global markets annually is used in catalytic converters to control detrimental automobile emissions.
Higher automobile emission standards in North America, Europe, and Asia continue to add pressure on automobile manufacturers to increase the application of platinum in catalytic devices and converters such as oxygen sensors.
Platinum catalysts are a key component for fuel cells—a power generation technology that integrates hydrogen and oxygen to form electricity and water. Fuel cells are set to become the eco-friendly power generation source of choice in the coming century and are the main source of future platinum demand.
Jewelry
The growing popularity of platinum jewelry over the past 20 years has been extraordinary. For a long time, Japan has been a traditional source of platinum jewelry demand, but double-digit growth rates over the last many years in both North America and China now render these two markets extremely important. Together, these two countries account for more than 40% of the world’s total platinum jewelry demand. Platinum is prized globally for its modest elegance and tensile strength, making it the most secure precious metal for setting precious stones.
Platinum coin jewelry is also popular globally.
Investment Metal
Platinum is called “high-octane gold,” for its stronger price moves and prospects for higher upside. Purchasing platinum is an easy means to invest in global economic growth because the metal is crucial for the economies of several industrialized nations.
Pure platinum legal tender bullion coins offer a liquid, easy, and dependable way to invest—the Platinum American Eagle, Canadian Maple Leaf, Australian Koala, Chinese Panda, and Isle of Man Noble.
All coins are 99.95% pure and can be procured in one-ounce and fractional sizes. In addition, investment-grade bars are available in 10-ounce and smaller sizes from different refiners.
Platinum-proof coins provide a way for investors to take part in the platinum commodity market and also to realize the advantages of owning a collectible coin. Platinum, for example, American Eagle proofs, has sold out for many of the denominations and, thus far, command a premium over the original sale price in the secondary market.
Some time ago, only Gold and Silver Eagles qualified for IRA accounts. The latest legislation expanded the rules concerning Individual Retirement Accounts, commencing on January 1st of 1998. For the first time, platinum is now qualified for IRA collections, not only through the Platinum American Eagle bullion coins but also through Canadian Platinum Maple Leafs and Australian Koalas.
Investment is allowed in both bullion and coins of platinum, on condition that it meets strict fineness requirements. These requirements are that the product should be 100% pure precious metal. The IRA custodian or trustee, who stores and accounts for the precious metals, may have additional restrictions.
American Church Trust Company (ACT) is an example of one company providing this kind of program. It must restrict the investments to broadly traded, fungible products that can be recorded and stored at their depository, that is, Republic National Bank of New York.
The Mocatta Delivery Order (MDO) and the Perth Mint Certificate Program are precious metal certificate and storage programs that enable investors to store their physical platinum in high-security vaults for a low yearly fee. By presenting the certificate that entitles the bearer to receipt of metals, investors can claim the metal anytime they want or maintain the account while holding the more convenient certificate.
Market Fundamentals
Precious metals have long been known to hold an excellent appeal, when other financial instruments, like stocks and bonds, are declining. Shrewd investors, however, are not happy with merely securing their assets against inflation and other economic risks. They also request the opportunity for capital appreciation. The unique fundamentals of platinum provide investors both the potential for profit and the ability to hedge against insecurity.
Platinum’s supply/demand fundamentals are secure. In case platinum mining ends today, above-ground reserves would last less than a year. Conversely, gold reserves would last approximately one-quarter of a century. Platinum’s supply is tight even during periods of comparatively normal mining production.
Strong Demand and Why It Will Continue
In the United States and many of the world’s swiftly growing economies, new clean air legislation (Tier II Emissions Standards) is considerably increasing the total amount of platinum group metals added to automobiles.
Platinum is vital for a broad range of products that are being consumed in countries experiencing rapid gains in incomes. Due to this, global platinum use per unit of world economic output has grown quickly in the last 10 years.
Platinum jewelry has changed from being a thing of the art deco past to being in vogue in China and North America. The largest country and the largest economy in the world are seeing an increased demand for platinum jewelry. This is besides Japan’s comparatively steady consumption of the white metal for jewelry purposes. While growth has been robust, the general market share is still low—meaning that these developments of increasing demand are sustainable for some time in the near future.
Platinum is utilized in a rapidly growing array of products, ranging from spark plugs to industrial refrigerators. The small amount of platinum used in every product means that companies that manufacture them and the consumers that purchase them are comparatively insensitive to considerable increases in the price of platinum.
Globally, investment demand by individuals is growing. Many are enticed by the broadly improving fundamentals in the platinum market. In the rising markets, platinum generally offers a substantial premium over gold. Platinum has traditionally been more expensive than gold because it is significantly rarer, and has more widespread and irreplaceable uses.
Emerging Markets
In developing countries, the consumption of catalytic converter platinum is gradually becoming a vital factor for the platinum market. Most of the world works on diesel—a fuel that functions ideally with platinum catalysts than with palladium catalysts.
Twenty years ago, nations that might have had few, if any, environmental regulation, currently have restrictions on auto pollutants. There has been a certain amount of loss in the automotive catalytic converter market share to palladium that resulted from shifts made this metal was traded at $130. However, present palladium prices (now almost at par with platinum) have reversed this development back toward platinum usage.
Execution of Tier II standards in North America and stipulations for diesel engines in Europe will further boost the demand for platinum.
Catalytic converter legislation is increasing rapidly in Latin America. In the last five years, the country with the largest economy in the region, Brazil, and the country with the fastest growing economy, Chile, have both voted for legislation stipulating catalytic converter use.
Taiwan, Hong Kong, Singapore, Malaysia, and Thailand all have voted for legislation enforcing domestic catalytic converter use before the end of the decade.
Auto sales in Latin America and the upcoming market economies of East Asia have grown quickly in recent years. It is projected that in the next 10 years, platinum consumption for catalytic converters in emerging-market economies will exceed the current total consumption of this metal in North America, Europe, and Japan.