Platinum is supposed to be more expensive than gold

There are certain dogmas held sacrosanct by precious metals investors and one of them is that Platinum is supposed to be more expensive than gold. That’s just the way it is. Quite a few eyebrows lifted and jaws dropped last fall when the yellow metals price overtook that of platinum. The historic switch took place on Sept. 2nd when Comex Gold futures settled at $1,875.25 per troy ounce, just above platinum’s closing price of $1,873 per ounce.

When you consider the price history of the two precious metals-platinum has traded at a $200 to $400 premium to gold-the reversal was astounding. Just to give you a better idea, before the 2008 Lehman Brothers crash, platinum was trading at more than $2,270 per ounce while gold was trading under $990 an ounce.

Platinum is much more rare in nature than gold. More than ten times more gold is mined each year than platinum. Unlike gold, which is either held in bank vaults or used in jewelry, more than 50% of the yearly production of platinum is consumed (used up) by industrial uses, mostly in the automobile industry. Some 40% is used for jewelry manufacturing and 10% for investment purposes.

The Japanese seem to be very fond of platinum as they account for 95% of the platinum jewelry demand. There are reports in the press of a nascent interest in platinum jewelry in India, expected to make up 25%-30% of the total Indian jewelry sales in 2012.

The annual supply of platinum is only about 130 tons, equivalent to only 6% (by weight) of the total annual gold mine production. It is less than one percent of silver’s yearly output. Unlike gold, there are no large inventories of above-ground platinum. Therefore, any breakdown in the two major supply sources, South Africa and Russia, would catapult the price of platinum. An even more intriguing fact is that more than 90% of the world’s platinum production comes from only four mines: three in South Africa and one in Siberia.

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Tags: platinum, platinum futures, platinum futures prices, platinum price, platinum price 2012, platinum prices

Posted by admin on Jan 23 2012. Filed under Platinum. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry