As precious metals go, most focus is on gold and silver. But platinum has had bigger gains so far in 2012, amid industrial disputes in South Africa.
The platinum price is catching up to gold and may overtake it this year or next if supply disruptions continue and global growth improves.
The platinum price has rallied from US$1354 an ounce in late December to US$1689.
It soared to US$2252 in February 2008, then plunged to US$774 an ounce in August 2008 during the global financial crisis.
Platinum is seen as a proxy on global economic growth, given its largest use is in emission systems in cars and other industrial uses. It is also used in jewellery in markets such as China.
Signs this year of firmer economic growth in the United States, and potentially stronger automotive demand, have helped platinum.
However, the biggest price driver has been on the supply side, after violent strike action this month at the Rustenburg plant in South Africa, the world’s largest platinum supplier.
The mine’s owner, Impala Platinum, requested troops be sent in last week as strike action turned into a riot. Impala says it has lost more than 80,000 ounces of platinum production.
South Africa supplies about 75 per cent of platinum worldwide and the strike is threatening to spread to other South African platinum mines. Investors have not spared Australian stocks with South African platinum operations.
Shares in Aquarius Platinum, Zimplats Holdings and the much smaller Platinum Australia are sharply down from their 52-week highs. Higher platinum prices have had little effect so far.
Speculators have latched onto the rising price.
ETFS Securities, a large provider of exchange-traded commodities (ETC) and exchange-traded funds (ETF), has reported record fund inflows of US$38 million into its platinum ETCs worldwide.
Platinum was by far its most sought-after ETC last week. Another US$17 million was invested in ETFS’s palladium ETC. Palladium is a platinum group element.
Speculators are betting on significant ongoing supply disruptions for platinum as rolling strikes at South African platinum mines linger this year.
Some South African goldmines have also been affected by industrial action, as workers seek higher wages and/or better conditions.
The disputes show just how tense the industrial situation is in parts of South Africa.
Such disruption might force platinum producers to cut back on future mine expansions, thus dampening medium-term platinum supply.
Deutsche Bank reportedly believes the platinum market could be in deficit as early as next year, although one unknown is the size of platinum stockpiles in Russia.
Royal Bank of Scotland commodity analysts believe platinum will trade at a premium to gold by year’s end.
Platinum historically trades near or at a premium to the gold price, given platinum is dearer to mine. Platinum mines are typically underground, whereas goldmines vary between open-pit and underground.
At US$1689 an ounce, platinum still trails gold, at US$1756 an ounce, although the gap is closing.
Signs of stronger global economic growth this year could favour platinum over gold, which is regarded as a safe haven and hedge against future inflation.
Plenty of experts still believe gold has further to run as central banks worldwide print more money and inflation expectations rise.
Australian investors have few ways to gain platinum exposure.
The Australian Securities Exchange (ASX)-listed ETFS Physical Platinum ETC has low volume.
Aquarius Platinum and Zimplats Holdings are mid-cap stocks, and a handful of others, such as NKWE Platinum and Platinum Australia, are small caps.
Other options for speculators include the micro-caps Platina Resources, which has projects in Greenland, Western Australia and New South Wales, and Condoto Minerals, which has a Columbian platinum project.
Condoto Minerals listed on the ASX in 2010 as Bailey Minerals and was among the best-performing initial public offerings that year.
The platinum metal and platinum stocks clearly suit speculators.
The price can be volatile, and ASX-listed platinum stocks have been affected by company-specific problems, such as plant commissioning.
An uncertain global economic recovery adds other risks, and the platinum price might be due for a pause after such strong gains this year.
Most precious-metal-seeking investors are better off sticking with gold. For those who seek higher risk and return, platinum has some medium-term appeal if the global economic recovery improves.
