Mark Lamb | Wednesday, 30 July 2008

My precious

Weekly international investment round up to 29 July 2008

• Platinum’s appeal is growing

• Gold and oil speculators now seem to have the precious metal in their sights

Silver may shine and gold may glitter but platinum has long been the pre-eminent precious metal.
This week Anglo Platinum Ltd, the largest producer of the metal announced a record 22 per cent increase in profits for the first half of the year as demand for their precious commodity increases with investors taking an ever growing interest in it due largely to its many varied uses and aided by the different types of investment schemes which are now springing up in an attempt to harness the metal’s profit potential.
Platinum’s value in jewellery terms is greater than gold as it is rarer and takes more skill to work. In fact, to give an idea of its scarcity it is often said that if one took all the platinum ever mined from the beginning of time it would fit into a typical living room! It takes around eight weeks to refine pure platinum from the ore extracted from the earth and about two tonnes of ore to obtain enough platinum to make just one ring. Also, platinum jewellery is most often 95 per cent pure compared to only 75 per cent for 18 carat gold.
Unlike gold however, platinum is not seen as a safe haven in times of uncertainty and has therefore historically played a much lesser role in pure market investment terms but as the appreciation for its many industrial applications grows, the demand for investment in it also increases.
Not only is it the only material suitable for the electrode in heart pacemakers for example, but by far its largest industrial use is as a catalyst in devices that remove vehicle pollutants with such auto-catalysts currently accounting for 60 per cent of its usage. Clearly, as emission regulations tighten around the world combined with the fact that the number of cars is set to increase the demand for this precious material is likely to outstrip supply.
In fact, South Africa, which produces about three quarters of global platinum output is currently struggling to keep up. Electrical power shortages of the type that shut most mines in the country for nearly a week in January are only likely to further hamper future production and add to it’s rarity over the forthcoming years.
The speculators who have previously been successful in gold and oil now seem to have platinum in their sights. Not only have fund companies launched new investment vehicles which track the value of platinum, several exchange-traded funds (ETF’s) are increasing their platinum holdings and selling these shares onto their clients. The Mumbai Commodity Exchange has also just started trading platinum futures in a similar way to those already operating in Tokyo and New York. In truth, although these measures are likely to increase trade and demand in platinum it could also create artificial markets which are unrelated to the metals actual real value and availability so caution should be applied before investing.
Based on world events, last September I suggested gold was likely rally from its price of $700 an ounce, its price is now $923. At around $1,759 an ounce, platinum’s appeal is also likely to multiply.

Mark Lamb is Director of FPC Investment Consultants who are Independent Financial Advisers and regulated by the MFSA to provide investment services under the investment services act 1994. For further details please contact Mark Lamb, by email on [email protected] by phone on 21318008 or through FPC’s website www.fpcmalta.com
This article does not intend to give investment advice and its contents should not be construed as such. Information in this article has been obtained from various public sources and is given by way of information only. Readers are always encouraged to seek independent financial advice before making any investment decision