Platinum Precious Metal Nature and Uses
12/29/2010
Platinum is a precious metal which has for a long time sold at a higher price than gold. Normally platinum sells for 200% of the price of gold (however, there have been dips where platinum sold for less - in the '90s platinum and gold were both around $400). Platinum is seen as scarcer than gold, and that is true as far as the number of ore bodies of platinum. Also, in terms of stock-piles, platinum's current inventory is much smaller than gold. But annually, 20 times the inventory of platinum is produced- because much of it is used in production. Gold is stock-piled by individuals and central banks for its confidence value (treasuries who hold a lot of gold tend to have strong currencies even though the currencies are no longer exchangeable for gold). The gold produced annually is 1.2% of current inventory while platinum is 2000% of current inventory.
Gold has far fewer uses than platinum. Platinum has many uses. Platinum is used for making coatings on missile nose cones, for jet engine fuel nozzles, for automobile catalytic converters, for containers which can withstand higher temperatures than the substances they hold, for medical treatments for cancer, for jewelry, and for auto spark plugs. This is only a partial list. The automobile industry alone corners 1/3 of the platinum market. Eighty percent of the world's supply of platinum is found in South Africa. Russia is the second most prolific producer of platinum at 11%. North America produces much of the rest primarily as a byproduct of palladium mining. One pure ounce of platinum requires the processing of 10 tones of ore. Platinum is often found in ore that also contains gold and palladium. In addition, platinum is found as small nuggets, grains, and dust with a purity of 50-75%.
Due to its attractive grey silvery-white luster, special properties, and rarity, platinum has been chosen
as a metal for coinage. American Eagle 1 oz platinum proof one hundred dollar coins are minted by the United States. Having first been minted in 1997, the Platinum Eagle is selling for about $300 more than the 1 oz Gold Eagle (spot price gold - $1413.10 at the close today, spot price platinum - $1754 at the close today). Though the U.S. mint Platinum American Eagle is fairly easy to obtain, there are other government minted coins available for purchase. You can buy: Canadian Platinum Maple Leafs, Australian Platinum Koalas, and the Isle of Man Platinum Noble Coins. One ounce bullion bars are also available from private mints and dealers. Half ounce, quarter ounce, and 1/10 ounce coins are found in the American Platinum Eagle set. The Australian platinum coins go as low as 1/20 of an ounce. Ten ounce and 1 kilogram (about 2.2 pounds) Australian platinum coins can be had also!! All of these minters produce gold and silver coins, too.
One must think carefully about investing in platinum. Dealers need to make a profit selling these coins. The U.S. mint sells platinum Eagles at a 8% premium (mark up) to the spot price of platinum. Coin dealers who then sell the coins add another 2 % premium to the price they get from their wholesalers, who acquire coins from the mint. These premiums add up! I was able to find a 1 oz American Platinum Eagle for $1930 online today. The best price that a dealer online would pay for a 1 oz American Platinum Eagle was $1754. That's $146 difference between buy and sell on the same day!
If you plan, for instance, to buy American Platinum Eagles as an investment to pay for your children's college, you might want to consider patterns to precious metal values. In the past, if the United States economy recovered and started to soar, precious metal prices typically DROPPED. Precious metal prices can stay up a long time, but they can also stay down a long time. If you could wait a decade for prices to start to rise again, it might be a proper investment. If you anticipate hyper-inflation, it could be a good investment now.
But there is still yet another argument that anticipates the direction of platinum prices. Some experts claim that platinum is different. They say demand for platinum is so tight (industry needs so much) that gold and silver prices might fall, but not platinum prices. The wide use of platinum in manufacturing, it is said, will keep the price elevated.
Known for its many uses, the U.S. government banned the sale of platinum during WWII. It was a vital material to the war effort. While the ban was on, gold became the precious metal of choice for engagement rings. It is speculated that platinum's recent extreme popularity has come about because of its beauty and star appeal. As is the case with many trends, Hollywood stars set the tone for engagement rings. Not unusual for TV is a star flashing a brilliant platinum engagement ring. Platinum is more durable than gold, that is, it is harder and will show no wear over a lifetime. The fact that platinum is more expensive than gold only adds to its mystique.
I would say that before purchasing platinum coins or jewelry for investment, a person should read a lot about the platinum market and discuss precious metal investment with an authority. Market swings in the precious metals market ARE severe!
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Comments
Great info on precious metal investing.
I have always been intrigued by platinum and palladium. So far for investing in precious metals I have stuck with gold and silver. There have certainly been a number of buying opportunities for platinum group metals though. Thanks for the great article!
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