With the consensus now pointing to a more sustainable global recovery, platinum could be the precious metal set to shine brightest in the long-term, relegating gold to the shade.
While bullion arguably takes up the majority of investors’ attention, platinum is by far the most valuable precious metal given that it is extremely rare, and it is very expensive to mine.
Platinum has a plethora of industrial and environmental uses. Its particular set of characteristics means that aside from its use in jewellery, it is used for LCD displays and fibre-optic cables, but most significantly platinum is heavily used in catalytic converters in motor vehicles to reduce toxic emissions such as carbon monoxide.
For its part silver, too, has a strong set of industrial uses, in addition to its huge popularity for jewellery. It is famed for being the best conductor of electricity of any metal, its anti-bacterial properties are used in the medical industry, and is still used in dentistry. In fact about 50 per cent of silver consumption is driven by industrial demand, compared with just 10 per cent for gold.
But the price of silver is still very much tied to the gold price, and in 2013 precious metals have not covered themselves in glory, with gold and silver down respectively by 22 and 29 per cent, while platinum has notably just shed 6 per cent of its value year-to-date to November 1, according to Johnson Matthey/Bullion Vault figures.
Gold has been the primary reason for holding back the price of silver, with correlations between the two metals hovering at multi-year highs. Typically, silver prices are closely linked to gold, but the correlation is now above 0.90, meaning 90 per cent of the price moves in silver can normally be explained by gold, according to ETF Securities.
But while the financial crisis saw millions of investors rush to find shelter in gold, which was already enjoying a prolonged bull-run, it has endured severe volatility during 2013 as the strengthening US dollar and overall global economy has seen more and more investors turn their back on the yellow metal.
All of this and more have helped drive platinum further back into the spotlight. F&C Investments’ co-head of multi-manager Gary Potter says: “There is very much an industrial platform for platinum, given its usage in the car industry. Taking into account the recovering global economy and potential future car sales, especially within emerging markets, this makes platinum more attractive than gold.”
Charles Stanley Direct’s head of investment research Ben Yearsley concurs that the industrial demand for platinum gives it an edge over gold. But he also points out that political tensions and problems associated with the mining of the metal can also cause price volatility.
The vast majority of platinum, at some 75 per cent, is mined in South Africa, which can often be burdened by issues such as union strikes and at times haphazard electricity supply to the mines.
