One only needs to check the platinum price to see it is a good investment. Platinum is much rarer than gold and is mined in smaller quantities. The largest producer of platinum is South Africa. It is estimated they hold 95 percent of the world’s platinum reserves. While the traditional hedge against an unstable stock market is gold, platinum does have some of these qualities. However, it should be noted that platinum is more volatile than gold. However, this makes platinum a very good speculative investment.
The price of platinum is very much controlled by the auto market. This is because up to 50 percent of all platinum used is manufactured into catalytic converters. As technology in converter production improves less expensive palladium will make up more of each converter unit. Platinum is also used to produce jewelry, and is widely used in the chemical, electrical and glass industries.
Financiers interested in investing in platinum should keep an eye on the platinum price. In addition, they should also have a pulse on how the automotive industry is performing, especially in emerging markets like China and India. Typically when the auto industry is down so is the price of platinum.
Despite the current economic downturn, China’s economy is continuing to grow meaning they need more cars and trucks, and therefore catalytic converters. This is good news for platinum investors. As more emerging economies pass and enforce new air pollution laws the demand for catalytic converters and platinum will increase further. On the other hand, as more electric cars are built, this demand may eventually start to wane. It is anticipated however, that catalytic converters will be needed for the foreseeable future.
As mentioned, platinum is used to produce jewelry. In many emerging markets jewelry is not necessarily worn, rather it is purchased as an investment. Having said that, this market should increase as well as citizens from emerging economies purchase more and more goods. This means platinum is likely to rise in price. While platinum is subject to price fluctuations it typically recovers higher than its drop.
In the end, platinum is used in the production of catalytic converters. Platinum is also used in the chemical, electrical and glass industries. Jewelry is also made from platinum. The automotive use of platinum accounts for up to one half of the use of this metal. This gives the automotive industry some control over the spot price of platinum. Furthermore, platinum is more volatile than gold making it an excellent speculative investment.