{"id":31728,"date":"2012-08-20T06:10:31","date_gmt":"2012-08-20T10:10:31","guid":{"rendered":"http:\/\/countingpips.com\/forex-news\/2012\/08\/warning-signs-for-platinum-investors\/"},"modified":"2012-08-20T06:10:31","modified_gmt":"2012-08-20T10:10:31","slug":"warning-signs-for-platinum-investors","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex-news\/2012\/08\/20\/warning-signs-for-platinum-investors\/","title":{"rendered":"Warning Signs for Platinum Investors"},"content":{"rendered":"

Article by Investment U<\/a> <\/p>\n

Strange happenings are afoot in the platinum market…<\/p>\n

Despite prices falling as much as 28% over the past year, investors are still betting heavily on further declines to come.<\/p>\n

As The Wall Street Journal<\/em> reports, \u201cIn recent months, a number of money managers have ratcheted up their bets on a decline in platinum prices to the highest level ever<\/em> in the futures market.\u201d<\/p>\n

And the U.S. Commodities Futures Trading Commission says these positions now account for a third of the platinum futures and options market.<\/p>\n

What exactly is going on?<\/p>\n

Well, it seems the biggest problem lies with everyone\u2019s favorite scapegoat\u2026 Europe.<\/p>\n

Western Europe: Platinum\u2019s Largest Market<\/strong><\/h2>\n

According to The Wall Street Journal<\/em>, Europe is by far the world\u2019s largest market for diesel-fueled vehicles.<\/p>\n

And platinum\u2019s main industrial use is for the catalytic converters of these cars.<\/p>\n

It\u2019s estimated automotive sales in Europe are on pace to hit a 20-year low this year.<\/p>\n

Knowing these facts, it makes sense why platinum has been on a steady decline. But things might get worse for the industry before they get better.<\/p>\n

That\u2019s because not only are platinum prices closely tied to the ups and downs of Europe\u2019s automotive industry, South Africa controls 80% of the world\u2019s platinum reserves.<\/p>\n

And it\u2019s estimated that over half of listed platinum miners doing business there are either taking on losses or are on the verge of doing so.<\/p>\n

In other words, however rare platinum is in nature, there\u2019s too little demand for it in our current market environment, leaving too much of it to go around.<\/p>\n

Mining.com also reveals a number of new mining projects outside of South Africa that could further add to the supply glut over the next two years, especially if Europe\u2019s fiscal crisis continues.<\/p>\n

But that\u2019s not all. In fact, there\u2019s another red flag that\u2019s making platinum investors nervous… Gold prices.<\/p>\n

Platinum vs. Gold<\/strong><\/h2>\n

For the last 20 years, platinum has been the most expensive metal around.<\/p>\n

But today, it\u2019s trading at a 27-year low compared to gold. As I write, gold is just over $1,600 per ounce. Meanwhile, platinum is trading at just under $1,400.<\/p>\n

The platinum-to-gold ratio generally indicates two things:<\/p>\n

    \n
  1. If platinum prices are higher than gold prices, the global economy is expected to pick up.<\/li>\n
  2. If platinum prices are lower than gold prices, it signals fearfulness about the future state of the economy.<\/li>\n<\/ol>\n

    But while the near-term prospects for platinum may look bleak, you can expect a big opportunity for the market as soon as Europe gets back on track.<\/p>\n

    And you can be ready for the rebound by keeping platinum ETFs such as ETFS Physical Platinum Shares<\/strong> (NYSE: PPLT) on your radar, which is designed to track the precious metal.<\/p>\n

    Another long-term approach may be investing in companies that will reduce exposure to the price swings and production disruptions coming from South Africa.<\/p>\n

    Stillwater<\/strong> (NYSE: SWC), an American platinum mining company based in Montana, is a great example. It\u2019s the only U.S. producer of platinum and palladium and is the largest primary producer of platinum group metals outside of South Africa and Russia, the world\u2019s largest and second-largest holders of platinum, respectively.<\/p>\n

    Bottom line: Just be patient. Global auto sales are rising all around the world, except in Europe. And as soon as the European economy turns around, platinum prices should be coiled and ready to shoot higher.<\/p>\n

    Good Investing,<\/p>\n

    Mike<\/p>\n

    \n<\/a> <\/a> <\/a> <\/a> <\/a>\n<\/div>\n

    <\/p>\n

    Article by Investment U<\/a> <\/p>\n","protected":false},"excerpt":{"rendered":"

    Article by Investment U Strange happenings are afoot in the platinum market… Despite prices falling as much as 28% over the past year, investors are still betting heavily on further declines to come. As The Wall Street Journal reports, \u201cIn recent months, a number of money managers have ratcheted up their bets on a decline … <\/p>\n

    Continue reading “Warning Signs for Platinum Investors”<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-31728","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/posts\/31728","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/comments?post=31728"}],"version-history":[{"count":0,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/posts\/31728\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/media?parent=31728"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/categories?post=31728"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/tags?post=31728"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}