July 20, 2005
Platinum Prices Will Remain High, Says Website
The website Resource Investor predicted the price of platinum should remain firm and may even get higher, due to long-term supply and demand issues.
"Essentially, the value of platinum is almost fully underpinned by demand because of its use in jewelry and in a multitude of industrial capacities. This demand, though highly leveraged to global economic growth, seems likely to remain strong given the extraordinary amount of real and permanent growth occurring and continuing in the long-term in China and the rest of Asia," it said.
Even if Chinese tastes shift away from platinum jewelry, the site argued, the explosive growth of automobile use in China and that of industry in general should keep demand for the metal solid moving forward.
South Africa is the world's foremost producer of platinum, with significant quantities supplied from Russia. North and South America also produce platinum. The website noted that South Africa and Russia are subject to national complications that jeopardize their supply potential. Platinum mines in South Africa are being afflicted by rising labor and engineering costs as mines get deeper and unions become more militant, as well as by negative political upheavals and by the strong rand.
In Russia, political uncertainties look set to persist for some time, meaning supply from there cannot be regarded as particularly reliable, the site said. "The result is that in both nations, potential for supply growth is restricted." Current and potential production of mines in North and South America, though less fraught politically, are likely to remain behind that of the top two supplier countries, according to Resource Investor. "The upshot on the supply side is that at projected rates of demand growth, long-term support is abundant for the current platinum price level."
The site also observed that although the metal currently trades for a price approximately double that of gold, the market for platinum differs investment accounts for only a tiny proportion of demand, despite the primary precious metal halo of the former. Platinum derives an inconsequential proportion of its value from being merely a store of said value, which cannot be said of gold.
The site advised its readers that investments in platinum or its producers could be a better long-term bet than the gold sector. "The prognosis in the long-term for platinum prices may well be one of relative stability and quite possibly one of further increases on the back of strong demand and inadequate supply, not of the drop off that some have predicted," it said.