Platinum Prospects For 2010

December 30, 2009 | By | Reply More

The first year of the new decade is likely to set the scene that could last until 2013 maybe longer.

Investors may face either the prospect of a period of deflation, possibly setting in by the end of the first quarter of the new year, followed eventually by considerable inflation. The alternative is steadily increasing inflation for as long as the US, Europe and others can keep their new money printing presses churning out new banknotes while using every trick they can think of to delay the inevitable blow up.

The BRIC nations particularly China, and other developing countries, have clearly signaled their loss of faith in the US dollar and its status as the world’s reserve currency, and their reluctance to take on any further US debt. If we believe the latter, that western politicians will continue with the economic policies they have so enthusiastically embraced in the past twelve months then Platinum’s prospects for 2010 can be considered rosy.

With Obama’s dash for frittering away the US dollar, coupled with ‘follow my leader’ tactics from other western administrations, whose diminishing hope is to put off the day of reckoning by continuing to flood the market with bank notes, treasuries, etc. bearing the promise of payment in their exchange.

Therein lies the problem, the promise of payment is in exchange for more worthless paper, not of any asset of substance, gold is the first to come to mind but there are alternatives.

That Platinum is a precious commodity is without doubt and yet it is not considered, by the population at large, to be a safe haven metal, hedge against inflation and store of value on a par with its less valuable cousins, gold and silver.

However it has advantages to canny investors not enjoyed by gold and silver. In the scenario that we expect to play out in 2010 and beyond, we must assume that flooding new money into economies will result, however temporary, in an improvement in the business environment, that the feel good factor of higher wages, fuller employment and coupled with government spin, will aid industry in the west, particularly the auto industry.

In the meantime an increasing demand for the finer things in life can be expected from the emerging nations, where sound economic policies aided by populations used to hard work and long hours and who have the habit of thrift, and above all still have huge growth potential, will again benefit manufacturing, with automobile demand likely to be among the leaders.

With platinum essential in the production of catalytic exhaust systems any increase in confidence in auto production and sales is reflected in its price.

Coupled with South Africa’s continuing decline in production, the world’s largest platinum producer is not going to reverse the trend in the foreseeable future. It is not just the miners union that has disrupted production, the main cause has been the country’s electricity supplier (Eskom) being unable to provide reliable power and has yet to address the combined problems of lack of managerial competence and funding to expand capacity and modernise existing power stations.

Annual platinum production falling ,auto manufacturing increasing demand means that no vehicle manufacturer can afford to be without adequate stocks of the catalyst.

If you believe, as we do, that however artificially created, 2010 will herald the great confidence trick that recession is behind us and that prosperity has returned to the western world then platinum looks a good each way bet.

By the time the recklessness of our politicians eventually results in massive inflation with the bottom falling out of stocks and government securities, hopefully we will have seen platinum back above $2000 an oz and cleared a profit. If we get our timing wrong at least we will own a precious metal that will retain some reasonable value.

You can invest in physical platinum held on deposit in vaults in London or Zurich from as little as one ounce. Go to www.goldmoney.com for details. ETFS Physical Platinum (PHPT) is an ETF holding physical platinum, go to www.ctfsecurities.com for more info.

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Category: Platinum Group Metals

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