Aaron Katsman 58.
(photo credit: Courtesy)
When it comes to investing in precious metals, most investors tend to focus on
gold and silver. With gold in the midst of a multiyear bull market, and trading
at $1,600 and ounce, the yellow metal gets most of the media
Headlines like “Gold to Hit $2,000 an Ounce” and “Invest in
Gold to Cash in on US Dollar Demise” have appeared almost relentlessly over the
past couple of years.
Rising gold prices have been less about economic
fundamentals, such as rising demand, and more about inflation worries and a US
dollar hedge. The lack of economic fundamentals driving gold higher has led some
to think that the market has been taken over by speculators.
non-day-trading investors, the last thing that you want to do is invest in a
market driven by speculators. Before you know it, the speculators have moved on
to some other asset, sending the value of your investment plunging, all while
you are left holding the proverbial bag, without even knowing what
There is no question that for investors looking for a hedge for
inflation or US dollar exposure, gold is a reasonable investment.
there a better alternative? Best of both worlds
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Wouldn’t it be great if you
could invest in a metal that provides the same benefits of gold, like hedging
inflation and currency exposure, but has an increasing industrial demand as
well? There may be an effective solution for investors looking to get the best
of both worlds. Platinum is considered a “precious metal” and also has recently
seen surging industrial demand. Surging industrial demand without much of a
global economic recovery certainly is intriguing. If the global economy actually
starts to grow, this could be huge for the metal.
With a struggling
global economy, the logical question is where this increased demand for platinum
is coming from? The answer: the auto industry. While platinum has a number of
industrial uses – including lab equipment, thermometers and electrodes – its
primary use is in catalytic converters for the automotive industry. Catalytic
converters allow complete combustion of unburned hydrocarbons from exhaust into
carbon dioxide and water vapor, making it a critical component of any
Led by Chinese demand and a slight pickup in North American
sales, it looks like the auto industry has weathered the storm of three years
ago and is growing.
The use of platinum in jewelry is also a price
catalyst. As gold prices surge, demand for platinum has risen as well. Johnson
Matthey recently released a report that said, “Demand for platinum jewelry in
North America rose 30 percent last year as consumer confidence returned amid
improving economic conditions.”
In addition, the National Jeweler
reported, “The rising gold price particularly helped platinum sales at the
bridal counter, where couples didn’t hesitate to pick platinum over gold when
the price gap on a finished piece of jewelry narrowed to a few hundred
Michael Johnson of the ETF Database said: “Platinum is one of
the world’s rarest metals, with annual global supplies totaling only about 6
million ounces, meaning that prices can be very volatile at times. Nearly half
of the global platinum supply is used by auto manufacturers each year,
establishing a strong relationship between metal prices and the health of the
It is a basic question of supply and demand. With a
limited global platinum supply and an apparent increase in demand, the potential
exists for platinum to continue to surge.
So far in 2011 for investors,
platinum has seriously underperformed both gold and silver. As such, and with
strong demand, platinum may be a potentially rewarding investment for the second
half of the year.
Precious-metal investing is not for everyone and can be
very volatile. Speak with your financial professional to see whether an
investment in platinum would be appropriate for your
email@example.comAaron Katsman is a licensed
financial adviser in Israel and the United States who helps people with US
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