The rise of the platinum era

Platinum, the prestigious and expensive white metal has always been valued higher than gold. The continued expansion of advanced and developing economies has caused demand for the metal to grow at a faster pace than it is being mined.

In May 2008 platinum had reached 2060$ and in the same year it had fallen to a low of 850$ in December. Ever since then it has seen a gradual rise and had reached 1829 $ in February 2011.

Platinum and gold are definitely on the same playing field in that they are both commodities in the midst of powerful secular bull markets undergirded by strong long-term fundamentals.  Platinum’s bull gathered momentum around the same time as gold’s, in 2001, and had seen a 448% gain to its 2008 high.

Platinum which is considered the “rich man’s metal” usually costs more than gold

But today the tables have turned, gold had reached a life time high crossing the 30k mark whereas platinum was comparatively much low(touching the lowest point) for the first time in the market.

Though we saw tremendous downfall in gold in the last week, the trend continued to be the same. Currently, 1gm platinum would cost you Rs. 2700 in the physical market (Mumbai) that’s much lower than gold which is running at Rs. 2830.

During times of recession the industrial demand for the precious metal platinum decreases.  Due to this fall in consumption and development, manufacturers tend to purchases fewer amount of goods and make use of the platinum present in their inventories, instead of investing in newer and fresher stock of the metal.  This lowers the demand for the metals and puts the platinum market in a surplus, which automatically sends the market price of platinum plummeting.  However, when the economy rebounds, then there is a greater demand in the jewelry market as well as the automobile industry and platinum again returns to the deficit situation, which will send the prices higher.  This brings profits to the investors as well as the miners who are bringing the metal from the ground

Today platinum prices are running lower than gold and hence people are switching to platinum as one of the modes of investments.

Relative to gold platinum has a unique property that it does not tarnish or wear out.  Also due to its rarity, platinum is considered as a "symbol of prestige". These properties have made platinum a very special metal and a good investment option.

One can invest in platinum in the form of jewellery or bars and ingots of 1, 5 and 10 gram or even 1 ounce. These coins are easily available at retail jewelers.

So from a trading perspective, it makes sense to invest in platinum.  It is not jewelry and the auto industry alone that require platinum, though they are the bigger demand sectors. There are a whole lot of other industries such as turbine blades and medical sensors where platinum is used to a great extent.

The volatile conditions of the market leave a great opportunity for the rise in demand and rates of platinum in the future. Though there is a slump in its current value, this metal has the highest potential to earn returns if invested in today. So it is perhaps, the best opportunity to invest in Platinum, as its value will be better appreciated than gold in the future.

Is this the upside point?

Indians are usually the biggest buyers of gold in the world and from October to December, the calendar is full of festivals and weddings, creating many opportunities for people to flaunt their finery.

But international prices of spot gold have risen 21 percent on the year, their 11th straight year of rises, and a weakening rupee is also increasing domestic prices.

Gold prices rallied for the fourth consecutive day by adding Rs.220 to Rs. 29440 per 10 grams in the bullion market on Wednesday due to seasonal demand amid a firming global trend.

Traders said there was a buying trend seen in the commodities market as the weakening equity and Forex markets left no other option for investors, but to park their funds in bullions.

On the domestic front, gold of 99.9 and 99.5 per cent purity added Rs. 220 each to Rs. 29440 and Rs. 29300 per 10 grams respectively. The metal has gained Rs. 300 in the last three sessions

Gold prices showcased a strong performance on Thursday and surged by around two percent as investors’ risk appetite improved and they piled up positions across risky asset classes like commodities. Sentiments turned buoyant after the consortium of world’s top central banks’ acted in concert by joining forces to lend dollars more cheaply to foreign banks. Apart from the central bank’s act, the sharp decline in US dollar against a basket of currencies and the unexpectedly strong US payrolls data coupled with the encouraging US home sales data, underpinned yellow metal prices

Gold is considered a safe haven asset demand for which increases during times of uncertainty. However gold has shown positive correlation with commodities in general in last few weeks. While this positive correlation may persist in the near term, gold will eventually resume being a safe haven asset.

Gold rose sharply on Wednesday amid a rally across equity and commodity markets and amid a sharp drop in US dollar. Rise in ETF holdings also lent support to gold prices

The rally in equity markets reduced safe haven demand for the US dollar lending further support to gold prices. The US dollar index trades little changed today after a 0.9% slide on Wednesday. Weakness in US dollar made dollar denominated commodities cheaper for traders using other currencies

As gold remains in a conundrum of being a safe haven asset or a commodity in general, supportive factors persist for gold in form of Euro-zone debt crisis, loose monetary policy and intervention in currency markets. After ECB’s surprise interest rate cut, China cut in reserve requirement rate indicates a shift in policy stance. Gold may note some gains tracking cues from international exchange however upside is limited.