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Platinum Dreams [Malaysian Business (Malaysia)](Malaysian Business (Malaysia) Via Acquire Media NewsEdge) Platinum is the most precious metal of them all. How to invest in it? THIS article continues our discussion on the supply and demand for precious metals. Last month, I reviewed investment opportunities in silver and the previous month, I reviewed gold. This month, I will review platinum. Platinum is so rare that 10 metric tonnes of raw ore must be mined before producing a single ounce of platinum. (The ratio for gold is about four metric tonnes for one ounce.) It then takes five months to process platinum ore into pure platinum. All the platinum ever mined would fit into an average living room. Whereas the world produces about 1,782 tonnes of new gold a year, the world manages to produce only 133 tonnes of platinum. AUTO CATALYST DEMAND AS REPORTED BY REFINER JOHNSON MATTHEY Growth in the automotive industry (where the precious metal is used for autocatalysts) and industrial demand is expected to continue and with limited expansion in supplies, Johnson Matthey plc, global leader in advanced materials technology, said recently. It forecasts that the price of platinum will average US$ 1,870 per ounce in the next six months, compared with an average of US$ 1,762 during the six months to the end of April 2011. `With positive supply-demand fundamentals and continuing global economic growth, platinum could trade as high as US$ 2,000 in the period,' the company said. `If interest rates in key markets remain low, speculative investment interest should also support platinum's price.' However, the company warned that `external shocks,' such as oil price rises or negative sentiment surrounding sovereign debt, could once again prove to be a drag on the price. `Strong physical buying in China is likely to give support during price dips, meaning platinum is unlikely to fall below US$ 1,750,' the company said. The reason why platinum is today the most valuable of precious metals is because it is required in so many industrial applications. It is estimated that one-fifth of everything we use either contains platinum or requires platinum in its manufacture. Among all the known modern uses of platinum, most of the annual production is consumed by two dominant categories - catalytic converters and fine jewellery. Together, these two applications consume more than 70% of the world's supply of platinum. CATALYTIC CONVERTERS The best-known use of platinum is in the catalytic converter that is part of the exhaust system in the automobile. Instead of spewing deadly carbon monoxides, hydrocarbons and nitric oxide into the atmosphere, autocatalysts convert these harmful emissions into harmless carbon dioxide and water. About half of newly mined platinum is used for this purpose. PLATINUM IN HARD DISCS Back in 1957 when IBM first introduced the hard disk, storing just five megabytes of data required fifty disks, each measuring 24 inches in diameter. Sixty years later, a much smaller 3.5-inch disk drive is capable of storing over 500 gigabytes of data. An important process to achieving this remarkable increase in storage capacity is by adding platinum to the cobalt alloy to enhance its magnetic properties, allowing data to be stored at higher densities. With so much digital content being created (at higher and higher definitions) and then shared online by millions of people over high speed broadband Internet, the strong demand for higher capacity disk drives has resulted in more platinum being used in the manufacture of hard disks to enhance their storage capacity. The proportion of platinum in the magnetic alloy has gone up from less than 10% in 2002 to 35% in 2007. PETROLEUM INDUSTRY Platinum catalysts are used in oil refineries to produce high- octane fuels. Platinum catalysts also play a critical role in extracting gasoline from crude oil and for making high-octane fuels. PLATINUM INVESTING Quite a number of ways to invest in platinum are open to platinum investors of varying sizes, investment timeframes and risk appetites. PHYSICAL PLATINUM INVESTMENTS One way of investing in platinum is to own the physical metal by buying some platinum coins or bars. They are not to my knowledge available in Malaysia or Singapore but can be purchased from the Perth mint in Australia. As this is run by the government, you can be assured of getting the genuine metal. Buying gold, silver or platinum coins or bars from some dealers in Hong Kong, and most other countries is dangerous due to widespread cheating and counterfeiting. You really have to know whom you are buying from. However, for large investment amounts, it would be quite impractical and risky to own physical platinum as transportation and storage becomes an issue. In this case, non-physical would be a more convenient, safer alternative. PLATINUM EXCHANGE TRADED FUNDS (ETFs) Platinum ETFs are a safe way to trade platinum without having to take delivery or expose yourself to the risk of holding the physical metal. There is one traded on the Australia Stock Exchange (ASX). PLATINUM MINING SHARES These offer a leveraged play on platinum. Should the platinum price have a large rise, the price of the mining shares can go up by a factor of two or three times. Some trade on the JSE in South Africa and also the ASX in Australia PLATINUM OPTIONS & FUTURES For short-term speculative bets, you can take up a position by buying platinum options or futures contracts. These derivatives offer leverage to the platinum investor, allowing him or her to control a large position in platinum for a relatively small investment. On the flipside, the chance of losing one's entire investment is high, making them very risky investment options. * BILL WERMINE is a Fund Manager Representative with Phillip Capital Mgt Sdn Bhd. His e-mail is seminars@tradethe truth.com. His blog is www.traderstructhrevealed.com * DISCLAIMER: None of the information found in this Article should be considered an investment recommendation offered by Phillip Capital Malaysia and/or its subsidiaries. Kindly note that all financial matters discussed in this Article is solely based on the author's personal opinion and does not reflect any investment recommendation by PhillipCapital Malaysia and/or its subsidiaries. Further, PhillipCapital Malaysia and/or its subsidiaries makes no representation and assumes no responsibility or liability for, the accuracy or completeness of, or any errors or omissions in, any information contained herein. (c) 2011 ProQuest Information and Learning Company; All Rights Reserved. |