Invest in Platinum Not Gold


When gold is super high… as it is now, it may be time to invest in platinum not gold.

platinum-coin

1 ounce Platinum coin… the Manx Noble.

I am not a good trader… this I learn decades ago… so Merri and I stick with what we enjoy… writing and publishing… speaking at seminars and courses once in awhile. This is our biggest investment in time and energy… something for which we seem to be well suited.

When we make a little money extra we like to put it in some idea that is really new or buy and fix up old or troubled places.

The balance of my investments are really conservative… diversified and in long term investments that do not absorb a lot of my time.

My psychic is not geared to watching any currency… commodity or stock market moves… nor can I detach my personality from my investments the way good traders do.  Putting yourself into a fixer upper is great… if your taste matches that of many others.

You can put your heart and soul in making a rough place beautiful.  Others will pay a premium for your effort and imagination.  This can be a labor of love.  But being attached to a futures trade…  option or highly leveraged, speculative contractual investment position can spell disaster!

At the 2007 Jyske Global Wealth Management seminar two great speakers shared some really good thoughts about investing.  They are below… but one of them that really stuck with me was  Don’t fall in love with a stock…the feeling is never mutual.

The same is true with a trading position… Don’t fall in love with a position… it does not care how you feel!

This is why the Jyske Global Asset Management Managed Forex Portfolio makes sense for most of us.

However.

There is one commodity position I love and will trade.  Whenever the price of platinum falls lower than the price of gold, I will buy platinum and sell gold short.

Now others… who know much more about this than I do are saying it is already time to invest in platinum.

An excerpt from an article entitled “Platinum to Gold Ratio: Time to Buy Platinum” by Kris Begic in the July 2 2010 issue of  Asset Strategies International’s newsletter explains: One of the casualties in the recent pull back in commodity prices is platinum. Although officially characterized as a precious metal, platinum is often viewed as an industrial commodity due to its applications in the automobile and manufacturing sectors. Consequently, the current uncertainty and volatility in global markets has led to a downdraft in the price of platinum. This same uncertainty has further consolidated interest in gold as a “safe haven” stabilizing and strengthening the gold price. As an investor it is helpful to examine the historical relationships and valuations associated with a variety of commodities. The current ratio between gold and platinum is showing a compelling value proposition for platinum.

Before discussing platinum vis-à-vis gold it is helpful to look at some of the current trends in the platinum market. Platinum and sister metals palladium and rhodium are the cornerstones in efforts to curb global automobile pollution. The majority of cars produced globally contain Platinum Group Elements (PGE). Emerging economies such as China and India have adopted early stage Western benchmarks in relation to particulate emissions with PGE based autocatalysis playing a pivotal role. Although current PGE weightings in Chinese autos are a fraction of that found in modern European vehicles the introduction of fully refined fuels combined with tighter emission standards over the next decade will usher in an era of larger catalysts and heavier PGE loadings into developing markets. It is important to note that the Chinese auto market is now the largest in the world on a per unit basis with over 18 million automobiles sold in 2009. As automobile consumption continues to expand globally legislated demand for PGE based catalysts is expected to grow significantly, underpinning platinum prices.

Interestingly enough as prices have rebounded in 2010 there is evidence to justify the buying threshold for platinum increasing with strong appetite around the $1,500 per ounce level. This is definitely something to keep an eye on.

Platinum is ten times as rare as gold.  In 2008 when commodity markets crashed on the back of the financial crisis platinum plummeted from a high of $2,252 per ounce down to a low of $774. For a very short period gold actually traded higher than platinum. This was a “once in a lifetime” buying opportunity. The chart below shows the relationship between platinum and gold over the past ten years.

platinum-gold-chart

Historically it has taken roughly two ounces of gold to purchase an ounce of platinum. Today that ratio stands at approximately 1.2 to1. Investors with a “long and strong” view on gold prices should look at the current value of platinum in its historical context. Platinum is a rare and treasured metal and will continue to withstand the test of time as a store of value. Those seeking diversification in their precious metals portfolio may want to consider platinum.

Kris Begic is the Manager of Corporate Development for Platinum Group Metals Ltd. (PLG:NYSE/AMEX).

See a link to the full article on platinum below.

I am not ready to sell gold and buy platinum in a speculative position but an investment in platinum as a hedge against inflation makes sense to me now. You can get more details from Rich Checkan at Asset Strategies at rcheckan@assetstrategies.com

For those who like their platinum near at hand the Manx (Isle of Man) Platinum Noble is a one ounce platinum coin.

Manx Noble… heads…

platinum-coin

tails.

platinum-coin

They were for sale on eBay last week at about $1,700.

One other thought on platinum.

One niggling thought I have about gold is that the US government… might once again… when the US dollars falls…  might in desperation…. try to once again ban gold hoardings.  I hope…  I pray… that they will not be so desperate…. nor so stupid.

History does not necessarily support these prayers.  So they might.

This is just a thought… such a ban might not fall on platinum.

What history does support is that we can be pretty confident the world will see inflation in the years ahead. High inflation favors long term investments in gold.  Short term gold prices will rise and fall… sometimes being underbought… other times overbought.   When gold is super high… as it is now… near an all time high… it adds greatly to risk buying anything priced at an all time high.  So, as an inflation hedge, it may be time to invest in platinum not gold.

Gary

We’ll look more at platinum and gold in our October Quantum Wealth Course.

How We Can Serve You

Join Merri and me in Copenhagen.

One reason to have caution when investing in gold now comes from a thought shared at the last Jyske Bank Global Wealth seminar.

That thought was: periods of high performance are always followed by periods of low performance.

This thought seems so simple yet is profound… and is ignored by the majority of most investors.

This is why I enjoy speaking at the Jyske seminars.  get to hear all the other speakers.

At the 2007 two Jyske speakers shared these thoughts about investing:

•    We know less than we think we do…and that’s OK.
•    Listen to those who disagree with us…this expands our horizons.
•    The consensus may be wrong…truth is not created through repletion of an error.
•    Don’t listen to emotions…we are just human beings.
•    Don’t trust analysts…they may be human beings in disguise!
•    Always evaluate shares you hold with the same critical eye as if you do not…ask, “Would you have acquired it today?”.
•    Don’t fall in love with a stock…the feeling is never mutual.
•    Sell your losers and let your winners run.
•    Risk is your partner…for better or for worse.
•    You cannot succeed without making mistakes…if you opt for certainty, you will die anonymously.

One of the speakers Per Hansen, the equity strategist for Jyske Bank will speak at the August 24 to 27 2010 seminar with me.  He is one of the most cited Danish strategists and has extensive experience with media and investor communication.

Per’s message in 2007 was about the benefits of risk and he looked at realities of risk and how inflation turns risk upside down.

His three fundamental investment ideals that form the core of his strategy include:

•    We should expect 7% to 10% annual return in the stock market as a function of global nominal GDP growth and long term earnings growth plus risk premium.
•    To attain higher growth you must either increase risk or trust luck.
•    Invest in inexpensive equities that are paying a reasonable return.

Then Per talked about market noise. He asked, “why bother during crisis’s”? “Investors worry too much about short term noise. A lot of noise is being created by a lack of filters and investors should ignore this noise,” he said.

Per listed four important facts affect most investors:

•    They care too much about day to day volatility.
•    They care too little about strategy.
•    The short term process of buying and selling takes too much time.
•    This short term process leaves too little time to analyze and forecast.

He gave a suggestion of what to do when there is a market crisis.

•    Turn on the auto pilot and normally add to your position.
•    Do not panic.
•    Do not let feelings influence you too much.
•    Ask your wife!
•    Do not count on extra ordinary returns. Be realistic.
•    Add some restructuring stories to your portfolio
•    Know that a period of high returns will be followed by a period of low returns.
•    Do not underexpose yourself for the long term
•    Risk is your friend or alibi for expecting higher returns.

investment-course

We also love Copenhagen’s open air and…

investment-course

waterfront dining.  Summer is the best time to visit Copenhagen.

One speaker who may provide some special emerging market insights is James Ellert, Professor of Finance and  Strategy, International Institute for Management Development, a global business school in Switzerland. Other speakers include will be Bjorn Lomborg known as the “Skeptical Environmentalist.”  See more on Lomborg here.

Another speaker will be Jeff Rubin. Rubin was the Chief Economist for CIBC, a North American investment bank for 20 years. See more about Rubin here.

Kenneth Rogoff  the Thomas D. Cabot Professor of Public Policy and Professor of Economics at Harvard University and former Chief Economist for the International Monetary Fund is also a speaker. See more at Rogoff.

Another speaker is Daniel Brehon, the foreign exchange strategist, for Deutsche Bank AG.  See more about Daniel Brehon and Deutche Bank here.

Another speaker is Peter Berezin, Managing Editor Bank Credit Analyst Research.

The strong US dollar makes this the year to enjoy Europe and Thomas Fischer at Jyske just sent me this note: Gary due to the increasing US dollar, the cost for our August seminar in Copenhagen for Americans has dropped from about $2,050 to $1,700, a 15% discount. (THE COST INCLUDES MOST OF THE FOOD, TRIPS, MAKING THE CONFERENCE A GREAT BARGAIN.)

Some great things about the Copenhagen conference are the seminar of course…then there’s the stunning food and the wonderful visits included…This package includes:  accommodation at the Copenhagen Marriott Hotel for four nights, (25-28 August) including breakfast,  Reception and dinner at the bank’s Copenhagen offices, seminar fee and materials for the seminar sessions on Thursday, Friday and Saturday. full lunches on Thursday, Friday and Saturday, canal & harbour tour on Friday in the late afternoon, four-course gala dinner with entertainment and dancing on Saturday evening, and a Sunday excursion including lunch.

Merri and I always go on the excursion also to Silkebord with a drive out into the country, lovely food, picnic cruise and a chance to see the main office and the trading center.  This is always our most interesting, favorite and delightful conference…and we hope you will join us there!  We love the stroll along the harbor, the fresh air, wonderful meals and interesting people from all over the world.

See details on how to join Merri and me at Jyske’s bi annual Copenhagen seminar here Global Wealth Management Seminar.

Read “Platinum to Gold Ratio: Time to Buy Platinum”


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