{"id":60475,"date":"2012-08-27T11:02:06","date_gmt":"2012-08-27T01:02:06","guid":{"rendered":"http:\/\/www.fnarena.com\/index.php\/2012\/08\/27\/warning-signs-for-platinum-investors\/"},"modified":"2012-08-27T11:02:06","modified_gmt":"2012-08-27T01:02:06","slug":"warning-signs-for-platinum-investors","status":"publish","type":"post","link":"https:\/\/staging.fnarena.com\/index.php\/2012\/08\/27\/warning-signs-for-platinum-investors\/","title":{"rendered":"Warning Signs For Platinum Investors"},"content":{"rendered":"

\n\tBy Mike Kapsch<\/span>, Investment U<\/em> Research<\/p>\n

\n\tStrange happenings are afoot in the platinum market…<\/p>\n

\n\tDespite prices falling as much as 28% over the past year, investors are still betting heavily on further declines to come.<\/p>\n

\n\tAs The Wall Street Journal<\/em> reports, “In recent months, a number of money managers have ratcheted up their bets on a decline in platinum prices to the highest level ever in the futures market.”<\/p>\n

\n\tAnd the U.S. Commodities Futures Trading Commission says these positions now account for a third of the platinum futures and options market.<\/p>\n

\n\tWhat exactly is going on?<\/p>\n

\n\tWell, it seems the biggest problem lies with everyone’s favorite scapegoat… Europe.<\/p>\n

\n\tWestern Europe: Platinum’s Largest Market<\/strong><\/p>\n

\n\tAccording to The Wall Street Journal<\/em>, Europe is by far the world’s largest market for diesel-fueled vehicles.<\/p>\n

\n\tAnd platinum’s main industrial use is for the catalytic converters of these cars.<\/p>\n

\n\tIt’s estimated automotive sales in Europe are on pace to hit a 20-year low this year.<\/p>\n

\n\tKnowing these facts, it makes sense why platinum has been on a steady decline. But things might get worse for the industry before they get better.<\/p>\n

\n\tThat’s because not only are platinum prices closely tied to the ups and downs of Europe’s automotive industry, South Africa controls 80% of the world’s platinum reserves.<\/p>\n

\n\tAnd it’s estimated that over half of listed platinum miners doing business there are either taking on losses or are on the verge of doing so.<\/p>\n

\n\tIn other words, however rare platinum is in nature, there’s too little demand for it in our current market environment, leaving too much of it to go around.<\/p>\n

\n\tMining.com also reveals a number of new mining projects outside of South Africa that could further add to the supply glut over the next two years, especially if Europe’s fiscal crisis continues.<\/p>\n

\n\tBut that’s not all. In fact, there’s another red flag that’s making platinum investors nervous… Gold prices.<\/p>\n

\n\tPlatinum vs. Gold<\/strong><\/p>\n

\n\tFor the last 20 years, platinum has been the most expensive metal around.<\/p>\n

\n\tBut today, it’s trading at a 27-year low compared to gold. As I write, gold is just over $1,600 per ounce. Meanwhile, platinum is trading at just under $1,400.<\/p>\n

\n\tThe platinum-to-gold ratio generally indicates two things:<\/p>\n

\n\t1. If platinum prices are higher than gold prices, the global economy is expected to pick up.<\/p>\n

\t2. If platinum prices are lower than gold prices, it signals fearfulness about the future state of the economy.<\/p>\n

\n\tBut while the near-term prospects for platinum may look bleak, you can expect a big opportunity for the market as soon as Europe gets back on track.<\/p>\n

\n\tAnd you can be ready for the rebound by keeping platinum ETFs<\/span> such as ETFS<\/span> Physical Platinum Shares <\/strong>(NYSE: PPLT<\/span>) on your radar, which is designed to track the precious metal.<\/p>\n

\n\tAnother long-term approach may be investing in companies that will reduce exposure to the price swings and production disruptions coming from South Africa.<\/p>\n

\n\tStillwater<\/strong> (NYSE: SWC<\/span>), an American platinum mining company based in Montana, is a great example. It’s the only U.S. producer of platinum and palladium and is the largest primary producer of platinum group metals outside of South Africa and Russia, the world’s largest and second-largest holders of platinum, respectively.<\/p>\n

\n\tBottom line: Just be patient. Global auto sales are rising all around the world, except in Europe. And as soon as the European economy turns around, platinum prices should be coiled and ready to shoot higher.<\/p>\n

\n\tGood Investing,<\/p>\n

\n\tMike <\/p>\n

\n\t
\n\tReprinted with permission of the publisher. The above story can be read on the website www.investmentU.com. The direct link is: LINK]<\/a><\/em><\/p>\n

\n\tNothing published by Investment U should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investment advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication or 72 hours after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Investment U should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.<\/em><\/p>\n

\n\tViews expressed are not FNArena's<\/span> (see our disclaimer).<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

Investment U suggests there are some warnings signs for platinum investors but patience should see some reward as prices for the metal should lift when the European economy turns around.<\/p>\n","protected":false},"author":9,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[22],"acf":[],"_links":{"self":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/posts\/60475"}],"collection":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/users\/9"}],"replies":[{"embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/comments?post=60475"}],"version-history":[{"count":0,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/posts\/60475\/revisions"}],"wp:attachment":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/media?parent=60475"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/categories?post=60475"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/tags?post=60475"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}