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Four reasons why platinum is about to take off… Here's how you can profit from the rocketing price

by , 26 March 2014

For nearly ten weeks, the top three platinum producers in South Africa have been dealing with wide spread strike action. With these producers accounting for 40% of global production, it's hardly surprising that the supply of platinum is under pressure. But that's only one reason why the price of platinum is getting ready to soar. Read on to uncover three other reasons contributing to a supply squeeze for platinum…

The supply of platinum is under pressure

Platinum is a very rare metal, Sean Brodrick in Investment U explains. In 2013, gold output across the globe was 2,700 metric tons. Over the same period, platinum output was just 150 to 200 tons.

So when anything happens that effects the production of platinum, it can have a massive effect on the supply of the metal.

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There’s already a deficit in the supply of platinum. In 2013, there was a shortfall of about 605,000 ounces. And it looks like it’s shaping up to get another 10% tighter this year.

A strike here in the platinum sector in just one driving force behind the price of platinum

On top of the strikes affecting the world’s top three platinum producers in South Africa, there are three other factors driving a supply squeeze on platinum…

Factor #1: Problems with Russian supply
Last year, Russia produced 13.6% of the world’s platinum supply, according to Johnson Matthey.

With the geopolitical tensions with Russia over Crimea, Western countries are threatening sanctions against Russia. If this happens, it could have an effect on platinum supplies.

Factor #2: Industrial demand is growing
The main use of platinum is in vehicle catalytic converters. And demand is looking set to increase.

As of September, new emissions rules come into force in Europe. This will add to the demand for platinum for catalytic converters in Europe.

And fuelling the demand for platinum is the fact that there are more diesel cars in Europe. Diesel engines need platinum to control emissions in the catalytic converters. Petrol engines can use palladium and don’t need platinum for their catalytic converters.

Factor #3: Demand by platinum-backed ETFs
The amount of platinum holdings in platinum exchange traded funds (ETFs) has hit a record high as demand by investors for these ETFs grows.

If you want to get in on the impending rise of platinum, you can invest in a platinum-backed ETF like NewPlat. You can read more about it here.

So there you have it, four reasons why platinum is about to take off.



Four reasons why platinum is about to take off… Here's how you can profit from the rocketing price
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