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ABC Bullion

A Few Points On Platinum

01 July 2015

As precious metals prices are largely unaffected so far by the events in Greece over the weekend we will take a look at platinum, which has fared the worst of the precious metals in the past 12 months.

Greece has become the first developed country on the planet to default to the IMF. Greece failed to make payment to the IMF on Tuesday. We’ll have more on this in this weeks market update, which you can subscribe to here: https://abcbullion.com.au/investor-centre/signup

Platinum fell off a cliff late 2014 when the mines on strike in South Africa went back to normal production. A rise in the US dollar over the past 12 months has contributed somewhat to the fall in price, but there is a chance that the selling has been a bit overdone. Recently we have seen a pretty dramatic increase in daily volume traded which could be a sign that we are nearing the bottom, and any contrarians out there will be watching the price in eager anticipation.

Platinum has dropped 28% since the 2014 high and 43% from the 2011 high (seen below) and is currently $108 AUD per ounce lower than gold, currently sitting at a spot price of $1,417.

 

plat


Some of the reasons for the sell-off is the fear that most of the demand for platinum, for use in car production (catalytic converters), will not be as sting in coming years, as an increase in the percentage of palladium might be adopted. One explanation could be the fact that the technical picture looked incredibly bearish after platinum fell through $1,300. This could lead to an increase in short selling which would also push the price down.

Platinum is an incredibly rare earth mineral, so we’d assume this sell-off will hit a bottom at some point, and the dramatic increase in open interest of late could be a sign.

Some interesting points on platinum:

* Rarest and heaviest of the precious metals
* The annual supply of platinum is only about 130 tons.
* All the platinum ever mined in the world would fill a cubic square less than 25 cubic feet
* More than 50% of the yearly production of platinum is consumed in production.
* There are no large inventories of above ground platinum to protect from supply disruptions (which adds to volatility)
* 90% of world production comes form only four mines, three of which are in South Africa

A depreciating AUD will also assist Aussie platinum investors and if prices drop any further it could lead to some mines becoming unprofitable.

So a very interesting spot for those potentially trying to find the bottom.

 

JOHN FEENEY