Buy Platinum (if you can afford $1800 per ounce)

February 4, 2008 10:58 PM

Jewelers, engine parts manufacturers, and most of all, investors are watching as platinum hits an all time high, topping $1800 per ounce. An electic supply crisis in South Africa is to blame/thank for this unprecedented rise as mines are facing limits to the amount of electricity they can use. A mining analyst said it could eventually top $2000/oz.
posted by JD Rucker (20 comments total)

Meh, day traders looking for something stable who think gold is passe or overpriced.
posted by delmoi at 11:09 PM on February 4, 2008

platinum hits an all time high, topping $1800 per ounce

Well, since gold is around $900/oz, at 1 PP = 5GP I'd have to rate platinum as a strong buy.
posted by dersins at 11:19 PM on February 4, 2008 [5 favorites]

Buy electrum!
posted by nasreddin at 11:32 PM on February 4, 2008

Buy electrum!

You fool! Everyone knows the currencies of Athas are Wood, Obsidian, and Bone.
posted by mr_book at 11:48 PM on February 4, 2008

Buy electrum!

I keep my money in Molybdenum.
posted by delmoi at 12:03 AM on February 5, 2008

I keep mine in a small iron box at the bottom of a large sack, hidden under 50' of rope, a flask of oil and 2 weeks of iron rations. Now back off my stash before I bust out my Bohemian Ear Spoon and do d6 of damage to your 0-level man-at-arms ass.
posted by dersins at 12:14 AM on February 5, 2008 [2 favorites]

I keep mine in a gelatinous cube. Along with a fifth of Georgi.
posted by nasreddin at 12:44 AM on February 5, 2008 [1 favorite]

NERDS
posted by empath at 12:49 AM on February 5, 2008

The morning news here in SA keeps telling us how its going to take them at least 5 years to get up to speed with the electricity production needed just to power the country in the state it exists in right now. I figure they probably can't even accurately estimate what kind of production they'll need to power the country in 5 years because further infrastructure development in the country is ironically, of course, dependent on there being enough electricity to power the tools to build it.

And that's all under the assumption that Zuma doesn't get elected next year (unlikely), in which case the mines (not to mention the rest of the country) are fucked real good, and the price of platinum really goes through the roof.

I'd say buy now, while you can still afford the shit, if you can.
posted by allkindsoftime at 12:49 AM on February 5, 2008

Be interesting to know if influential members of the South African gov. have taken positions in the platinum futures market.
posted by jamjam at 1:16 AM on February 5, 2008

I'm long metals in my personal account, gold and silver. I established these positions back in 2005 and have gradually been adding to them as cash flow and dis-investment from other asset classes permits.

After the ETFs (Exchange Traded Funds) launched, I naturally began to use these vehicles to gain exposure.

The problem with holding physical metal through a brokerage account are

• Transaction costs (physical)- my initial gold purchases were modest, and commissions very high as a percentage of total cost. I later started buying at least 60 ounces at a time which helped lower costs. An ETF doesn't have this problem, as it trades like a "normal" equity.
• Storage costs (physical) - you've got to pay quarterly fees for the storage and insurance of your metal; unless the commodity is moving upwards, effectively you're long an equity with negative dividend, so you've got to be careful here. Again, ETFs don't have this problem.
• Unallocated metal (physical) - early on in my metals experience I learned that if you purchase physical metal you rarely will be able to take possession as you've been sold what's called unallocated metal; effectively, you own a claim on a percentage of a 1K ounce (or larger!) block of gold or silver your brokerage holds. If you'd like to move your metal to another broker you must either sell it outright (triggering a tax event), or pay fabrication and shipping charges. These are relatively expensive.
• Taxes - metals are considered "collectibles" and are taxed higher than equities - also many European countries levy VAT on a metals purchase so you're getting hit on both sides of the trade. Again, you'll need a strong uptrend in the commodity to help you overcome this friction.
• Ignorance - most brokerages just don't know this market and the reps are relatively ignorant of issues related to being long physical metal. Much of what I've just posted I learned since establishing my initial positions in 2005.

I own a mixture of physical metal and ETFs, but if I'd had a choice I would have only purchased the Exchange Traded Funds. As attractive as ETFs can be, there are issues associated with long term ownership, most notably basis risk; the ETF funds its own costs by selling off a (relatively small) percentage of the physical metal each share owns. Over a sufficiently long period of time this will erode relationship between share price and the price of the underlying metal.

So that being said, does anyone know if is there an ETF for platinum? I remember reading about one year ago plans for such a vehicle were hitting industry resistance. And for good reason; GLD, one of the Gold ETFs has turned into a real beast, one of the top holders of physical metal, apparently capable of moving the market from time to time. There were fears that a Platinum ETF would markedly increase demand while supply either modestly increased or (as these events show) fell.

In any case, I'd be very careful about establishing a new physical position.
posted by Mutant at 1:55 AM on February 5, 2008 [5 favorites]

Does falling asleep count as establishing a new physical position?
posted by The Ultimate Olympian at 2:07 AM on February 5, 2008 [2 favorites]

As much as hugging the porcelain pagoda does...

sorry, I get excited by all topics financial. Good thing my wife is a banker as well.
posted by Mutant at 2:25 AM on February 5, 2008

The electricity problem in SA is probably going to worsen before it get's better. Luckily I work out of an office right next to a major tourist area. Can't be spookin' the tourists now.
posted by PenDevil at 2:45 AM on February 5, 2008

So that being said, does anyone know if is there an ETF for platinum?

The ZKB Platinum fund (ZLPA) trades in switzerland and ETFs Physical Platinum (PHPT) trades in London.

While if you time it right you can make some money, year in and year out precious metals are a bad investment. Stocks and bonds are calls on future cash flows, coupon payments or dividends, metal has no cash flows and just costs you money (at least to store it and insure it).
posted by shothotbot at 5:05 AM on February 5, 2008

Yeah, long term metal investing is a hedge against inflation, basically. Long term the price stays the same. Gold is worth less in real value then it was in the 1980s (IIRC)
posted by delmoi at 6:26 AM on February 5, 2008

And catalytic converters are beginning to be stolen from parked vehicles. A pair for a V8 powered BMW can top $4K, installed.
posted by bz at 8:27 AM on February 5, 2008

"Long term the price stays the same."

The value of the metal stays the same, however in currency terms the price is subject to change, perhaps large changes. But in terms of value, you're absolutely correct - it will remain largely constant across the horizon. Even so, one can observe spikes in value in either direction as speculative forces dominate fair value.
posted by Mutant at 8:35 AM on February 5, 2008

So wait... should I have waited to sell my platinum wedding bands?

(headdesk)
posted by Unicorn on the cob at 8:57 AM on February 5, 2008

So that being said, does anyone know if is there an ETF for platinum?

You can buy platinum through pool accounts at places like Kitco. I'd expect palladium is going to take off pretty soon too. It can be used instead of platinum for a lot of the industrial things.
posted by ryoshu at 11:01 AM on February 5, 2008