Why Platinum?
On February 4, 2003,
we wrote: “The short-term trend is UP to reach a new high. While we do not know where the final peak will be attained, we would secure any long positions with a stop loss at $ 680 and move it up to the extent the price moves up.”
The price of an ounce of platinum had just then reached a new high at $ 700, and today we know that final peak on that occasion was $ 708. Our recommendation to place a stop loss at $ 680 proved to be valid as the platinum price fell to $ 596 by the end of April. The platinum price has since climbed to a new high for which reason we want to examine what the future course may be.
The long-term picture
The above chart suggests that the supply and demand of platinum between 1991 and 1999 were roughly in balance. As from the year 2000, supply started to exceed demand dramatically even though in the year 2001, the situation seemed to return to normal conditions.
The bull market was resumed at the beginning of the year 2002 and it does not show any signs of abatement for the time being, suggesting that we should hold on to long positions but secure them with stop loss orders as this volatile market may reverse any time.
The medium-term picture
The collapse of the platinum price which occurred during the summer of 2001 was quickly reversed. A new bull-market started and took the price gradually higher to reach the $ 700 level in February 2003. It spiked out of the up-trend channel, failed to go higher and reacted down to the lower channel up-trend line.
The up-trend resumed where it had to resume, and at present, at $ 750, the price has again touched the upper up-trend line. Our advice is to be cautious at this level, however, to maintain long positions, but secure them with a relatively tight stop loss, maybe at $ 675, or higher.
The short-term picture
The short-term picture does not differ. The up-trend is well established, and even though at present the platinum price is close to the upper trend-line, we suggest maintaining long positions, but securing them with a stop loss as mentioned above.
Fundamental Considerations
The demand for platinum is expected to exceed the supply during the next ten years, according to analysts at the World Platinum Congress in Johannesburg. Analysts count on a demand of 9.91M ounces in 2012, which cannot be met by producers. For this, platinum prices should stay high.
According to a report by Johnson Matthey, the demand in the Jewellery sector, especially in China, has increased significantly. Chinese jewellers already account for half of all the platinum demand in this sector.
Demand from automobile catalyst producers has remained stable, and are still profiting from stocks built earlier. This demand will likely increase as new emission regulations come into force.
In Europe, 40% of all diesel motors already run on catalysts for which use platinum.
How to participate in the unfolding bull-market in platinum:
The following recommendations were valid at the time of writing, viz. at
and may no longer be relevant at the time of reading.
Peter Zihlmann
www.pzim.com
investment@pzim.com
forex@pzim.com
November 12, 2003
Disclosure: The author has not been paid to write this article, nor has he
received any other inducement to do so. The author is a shareholder in the
company and will benefit from any increase in the company's share price.
Disclaimer: The author's objective in writing this article is to invoke an
interest on the part of potential investors in this stock to the point where
they are encouraged to conduct their own further diligent research. Neither
the information, nor the opinions expressed should be construed as a
solicitation to buy or sell this stock. Investors are recommended to obtain
the advice of a qualified investment advisor before entering into any transactions
in the stock.
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