Platinum rarely garnishes as much attention as gold and silver, but since the beginning of this year, it has outperformed both in terms of price increases. Gold has gone up 5% and silver 13% — both more of a US dollar currency play than driven by any fundamentals — while platinum has risen 31% on the back of a tight supply market.
Platinum’s largest market is automotive catalytic converters, particularly in diesel engines, followed by jewelery and then electronics. Although the automotive industry in general is down in the west, diesel cars are doing well due to the rise in fuel costs and a switch to more economical vehicles. As environmental standards are raised in China, demand for platinum is likely to gather pace.
Most of the world’s platinum comes from just two sources of supply, nearly 80% from South Africa and 15% from Russia, making it very susceptible to supply disruptions, most recently power problems in South Africa. As the cold winter approaches in South Africa, European Exchange Traded Funds (ETF’s) are betting on load shedding hitting production. The ETF’s are holding 365,000 ounces; up from 40,000 at the end of 2007. Johnson Matthey predicts the market could hit $2,500 in the next 6 months.