Platinum Is A Historical Enigma

Johannesburg-SA (Mar 20)  Platinum has been a very disappointing metal for the longest time. Platinum is a rare precious metal; there are only about 250 tons produced each year. Primary production from South African mines accounts for around 80% of world output. The majority of the balance of annual production comes from Russia where platinum is a byproduct of nickel in the Norilsk region of Siberia.

Platinum is more expensive to produce than gold. The metal occurs naturally deeper in the crust of the earth making it harder to mine. Platinum has extraordinary and marvelous properties; it is denser than gold and has a higher melting point. For many years, platinum's nickname has been "rich man's gold." Over the course of the past four decades, platinum has spent the majority of time trading at an average of a $100 to $200 premium to the price of gold. In 2008, the platinum premium over the yellow metal reached over $1200 per ounce. However, in 2016 platinum descended into the abyss ignoring price action in gold as it fell to a $360 discount to its precious brethren, an all-time modern day low.

Despite its "more valuable" qualities, platinum has not traded at a price higher than gold since 2014, and the current discount of over $260 continues to be an enigma and a deviation from a historical and fundamental norm. The latest correction in precious metals hit platinum particularly hard as on a percentage basis it is was the biggest loser in the sector.

An ugly correction from the late February highs

The prices of gold, silver and even palladium declined in February as the prospects for an interest rate hike at the March Fed meeting caused the U.S. dollar to rally to the 102 level. The strong dollar is traditionally bearish for precious metals prices.

Source: SeekingAlpha