Investing in Platinum in 2013

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Investing in platinum now is a great long-term investment. Platinum has some of the tightest supply levels of all the precious metals market metals. Platinum has a strong course for future demand. Since platinum is currently trading lower than expected in pre-2013 estimates, investing in platinum now will allow an investor to have a long ride of success.

Bumps in the Road

However, investing in platinum right now will require a certain amount of patience and resilience and the volatile metal will certainly hit some bumps in the road. One of the reasons platinum is trading so much lower in 2013 than analysts expected in a surprisingly weak demand.

Demand for platinum is largely a function of industrial use. The automotive industry often drives demand. Platinum is used in virtually catalytic converters in the world. This metal is also used in certain fuel cell technologies. It is the automotive industry that is largely responsible for the currently surprisingly low level of demand. European automobile manufacturers convinced regulators there to allow the reclaiming of platinum from old car components. This had the effect of suddenly, and temporarily, increasing the world supply of platinum. Automobile manufacturers were able to insulate themselves from the wild supply fluctuations seen this year due to dwindling Russian platinum in the market and continued labor strife in global platinum producing South Africa.

As labor troubles have erupted and been resolved platinum has ebbed and flowed. Investing in platinum is not likely to be more stable for at least another year. However, the long-term trends are all in favor of increased platinum prices.

Demand Problems

The softening demand that plagued platinum in much of 2013 is seen largely as a temporary problem. The supply of old car components that have useful amounts of reclaimable platinum is finite. Additionally, automobile manufactures in the United States, Japan, Europe, and China, have seen steady growth in 2013 that is likely to continue through next year. The continued growth will speed the process of exhausting the supply of reclaimed platinum and lead to a pent up demand for platinum. This will put price pressure and please anyone investing in platinum in 2013.

Supply Problems

Platinum supplies are finite. Russia, previously among the world leaders of platinum production, is believed to have very low inventories and even less still in the ground. South Africa provides almost three-quarters of the world’s platinum group metals. The unpredictable and frequent labor disruptions have closed down mines several times this year, further limiting supplies. The underlying labor problems are not likely to be resolved soon, as miners are in engaging in wildcat strikes, without the backing of a labor union. Barring another unforeseen source of platinum coming on the market, the supply problems of South Africa will aid people investing in platinum by driving up prices in the years ahead.

Platinum as Hedge Instead of Gold

Gold, and to a lesser extent silver, are the classic investor hedge against inflation and economic turmoil. The global economy continues to grow, but the growth is tepid. Many investors are concerned the recovery could implode if the employment picture in the United States does not improve. However investors are not pleased with the two-year low price of gold. Investing in platinum is an increasingly popular hedge move instead of investing in gold.

Platinum supplies are known to be small. Platinum is one of the rarest precious metals. The price of platinum is similar to the price of gold per ounce, but seems to have more upward trending factors than gold does. Gold is also at a two-year low, a bigger dip than platinum has taken. These factors have many investors looking to platinum, instead of gold, to hedge against the next recession.

Platinum faces a bright future. An investor putting money today into platinum needs to be prepared for a bumpy year or so. However, the long-term prospects look very promising.