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Investing in platinum

The price of platinum peaked during its heyday in 2008 at 2300 dollars.

Then the rare precious metal fell all the way back to $ 754. Today, investors can take a troy ounce purchase for $ 960.

Investing in platinum may be interesting for investors in the coming years. This will be explained in the following article. The price of platinum since 1998 is shown in the chart below.

Worth less than gold

In the years before the credit crisis of 2008 it was without saying that the price of platinum was higher than that of gold. After the credit crisis, this seems to be less obvious. In the period 2011 - 2014 we see that the prices often fluctuate around the same value.

In 2015 there is a turning point. The price of platinum falls sharply below that of gold, as seen on the graph below.

Investing in gold after 2011 therefore seems a more sensible choice than platinum, while this turned out differently in the past. Then the value of platinum rose faster than that of gold.

Applications platinum

Platinum is a precious metal that is rarer than gold. The metal is not found in many places in the world. It is mainly mined in South Africa. Furthermore, the precious metal can be found in Russia and Canada.

Unlike gold, platinum is also used industrially. More than 50% of the demand comes from the industry.

The largest demand comes from the automotive sector. The
metal is widely used for the catalysts. In addition, it is used for various other industrial applications. This includes electronics, paint and petroleum. Furthermore, just like gold, it is widely used in the jewelry sector.

Causes of price fall

The fall in the price of platinum has various causes. These are mentioned below.

Diesel scandal

As mentioned earlier, platinum is widely used for catalysts in the automotive sector. The use of the precious metal helps to reduce harmful exhaust gases.

Platinum is mainly used for diesel cars. The diesel scandal in the automotive sector has had a negative impact on the demand for diesel cars. This has also reduced the demand for platinum.

Electric car

In addition, this sector has to do with the rise of the electric car. This transition has been initiated by Tesla. As a result, demand for other metals such as lithium has risen sharply.

Dollar

The dollar can also be designated as the culprit. The expensive dollar has been pressing on all precious metals in recent years. Both platinum and gold and silver have been in a downward trend since 2011. We already established this trend for the price of platinum earlier in this article.

On the other hand, the dollar is in a strong upward trend since 2011. This is shown in the graph below. The depressing effect on the price is caused by the fact that platinum is traded in dollars.

Trade conflicts

As we noted earlier, platinum is also used industrially. Trade disputes have therefore had a negative impact on demand and therefore also the price of platinum.

Opportunities

Is investing in platinum therefore promising? Yes, there are the following reasons for this:

Weakening dollar

Because interest rates rose sharply in the US last year. the price of the dollar has also risen sharply. Ensuring a recession in the US however, are increasing. As a result, interest rate increases are no longer self-evident. Even an interest rate cut is possible this year. Postponing interest rate hikes and the chance of an interest rate cut will most likely lead to a weaker dollar.

During the first 2 months of 2018 we saw the platinum price (orange line) react very strongly to a weakening dollar (blue line). From March the opposite was the case. The dollar rose sharply and the price of platinum fell sharply.

Hydrogen

Will we all be electric in the future? Or are we going to switch to hydrogen en masse? Car manufacturers such as Volkswagen and Audi invest heavily in driving on hydrogen. To convert hydrogen into energy, the use of a fuel cell is necessary. For the catalysts in these fuel cells there is relative
a lot of platinum. Increasing investments in hydrogen will therefore lead to a considerably higher demand for this precious metal.

Unrest South Africa

About two thirds of all platinum is mined in South Africa. There is political and social unrest in this country. The country is struggling with low employment. Miners are dissatisfied and ask for higher wages, this has led to strikes in the mines several times in the past.
About 70% of the platinum mines in South Africa are currently loss making. These mines are only still in production because of the low employment in the country. Closing will lead to even fewer jobs. However, keeping these mines open at the current platinum rates seems to be an untenable situation. Strikes and the closure of these mines will lead to a considerably lower supply of the precious metal. This will have a positive effect on the price.

Technically strong soil

When we take a look at the weekly chart, we see that platinum fell off at the level of $ 747 in August 2018. This was also the lowest rate during the credit crisis. This level has been tested twice so far but has not been broken. This means that this level can be seen as strong support. Investors could decide to place a stop loss below this level. This offers a huge risk / return ratio.

Rarity

Platinum is a rarer precious metal than gold. The assumption can be made that the prices of precious metals will continue to rise in the long term. The sources are exhaustive. Because platinum is rarer than gold, it could well be that the negative platinum-gold ratio is only temporary.

Conclusion

Investing in platinum can be a great alternative to investing in gold or silver. The current price level could be interesting for investors. However, the price is highly dependent on the factors outlined in this article.

This makes platinum a volatile precious metal with a higher risk than gold. On the other hand, it is likely that higher returns can be achieved with platinum.