The Case for a Platinum-Plated Metals Portfolio / Commodities / Platinum

Do precious metals still represent good value?

With gold justcoming off a new all-time high above $2,000/oz and silverhaving more than doubled off its March bottom, some investors may be wary ofentering these markets right now.

However, when adjusted for inflation, whenmeasured against the stock market, or when compared to total money supply, astrong case can be made that gold is not yet overvalued – and that silver remains undervalued.

Investors who are seeking an even more deeplyundervalued opportunity within the metals space should take a look at platinum.

What makes the case for platinum in particularcompelling compared to other metals? In a word, scarcity.

Platinum is more than twenty times rarer thangold. It is so rare that all of the platinum ever mined could fit into a roommeasuring 25 feet by 25 feet.

Of course, being scarcer than gold doesn’tnecessarily make it more valuable. In recent years, Mr. Market has decided thatgold is more valuable than platinum, with the latter facing some negativefundamentals.

An ounce of gold currently commands aboutdouble the price of an ounce of platinum. But historically, platinum has moreoften sold at a premium to gold.

The opportunity for investors is that meanreversion could take platinum back up to a 1:1 ratio with gold and then perhapsa healthy premium over the yellow metal. That would deliver buyers of platinumat current prices returns measured in multiples even assuming gold prices gonowhere.

What about the risk that platinum goes nowhere?The case against platinum is that its demand profile is very narrow, dominatedby the automotive industry, and is generally not held in monetary reserves likegold.

In large part due to a big diesel-emissionsscandal a few years ago, platinum has been out of favor for use in autocatalysts as manufacturers have turned more to its sister metal palladium. Butwith palladium now costing more than double what platinum does, incentives forsubstitution are strong.

There are also incentives for investors to substituteor supplement with platinum as part of their hard asset mix. Inflows into thetop platinum exchange-traded fund have surged this year along with the broaderwave of gold and silver buying.

It won’t take much of an increase in demand forplatinum to overwhelm mining supply. The platinum producing industry, such asit is, will struggle to arrest declining output levels.

“Beset by power and water shortages, alongsidewhipsawing government policies, South African producers have cut spending overthe past decade on mines responsible for 75% of global platinum supply,”reports Bloomberg.

The article continues, “Platinum output peakedin 2006, and the lack of investment in deep-level western limb shafts willresult in a further sharp contraction in production over the next 10 years.”

Platinum is set to become scarcer and scarcer.

The bleak supply picture is, for now, clearer thanthe demand outlook. Industrial demand could continue to slump if automakersshun platinum for palladium and focus increasingly on electric vehicles thatrequire no catalytic converters.

At the same time, however, platinum is a keycomponent in certain fuel cell technologies. The white metal is used incancer-treatment drugs, and platinum-cured silicone mixtures are used in arange of personal care products from lipsticks and shampoos to contact lenses.

More than likely, the ultra-dense metal willfind additional practical applications and will likely see growth in bothjewelry and bullion demand.

As a hard asset, platinum should benefit fromthe inflationary environment the world now faces. Meanwhile, if there’s aneconomic recovery, platinum prices would receive a new tailwind from risingindustrial activity.

You can buy platinumAmerican Eagle coins as well as individually sealed/assayed pureplatinum bars produced by reputable private mints.

As platinum sales tend to be a small fractionof gold and silver sales for most dealers, inventories of platinum products maybe sparse and premiums and bid/ask spreads can widen when market conditions aretight.

Some dealers will try to make the most out ofthe occasional platinum transaction by pushing heavily marked up “proof” coins.An investor who simply looking for an efficient way to accumulate platinumshould avoid these types of products – and these types of dealers.

Money Metals Exchange is proud to offer themost efficient way for individual investors accumulate physical platinum bars –Vault Platinum. Through this program, you canbuy physical platinum securely stored with Money Metals Depository without themarkup of minted bullion products. And you get the ultimate in security foryour platinum by storing in our Class 3 state-of-the-art vaults.

Stefan Gleason isPresident of Money Metals Exchange, the national precious metals company named 2015"Dealer of the Year" in the United States by an independent globalratings group. A graduate of the University of Florida, Gleason is a seasonedbusiness leader, investor, political strategist, and grassroots activist.Gleason has frequently appeared on national television networks such as CNN, FoxNews,and CNBC, and his writings have appeared in hundreds of publications such asthe Wall Street Journal, Detroit News, Washington Times, and National Review.

© 2020 Stefan Gleason - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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