Platinum’s Record High: A Prompt For Investment?

Michelle Smith–Exclusive to Platinum Investing News

News that platinum hit a three-year high on Monday, at one point touching $1,909.90 an ounce earned it little air time. Most of the coverage that platinum did receive came from references to the fact that gold caught up and it also broke the $1,900 threshold.

Over the past few weeks investors have been snatching money out of equities and pouring it into gold. Many have been so desperate for an alternate investment that they have even placed their cash in US Treasuries that will pay them virtually nothing in return.

So, what’s the deal with platinum? Where is the investment frenzy?

The answers could partially lie in the fact that investors are generally focused on two things at this point. Some are still hungry for growth and others just want safety.

Though platinum set a record this week, with regards to growth, when compared to the surges seen in for gold and silver this year, platinum is like the tortoise in the group. Platinum opened this month at $1799/oz, but in August 2008, during the global recession, the metal opened at $1717/oz. Platinum has yet to return to a high of $2,276/oz seen in March 2008.

Even Monday’s record hasn’t proved to be the launch that would capture those investors that throw cash at upward trends. Perhaps because it hasn’t proved to be a trend, it was merely a move, and one that wasn’t been sustained at that. In South Africa, by midday, platinum was at $1,862.50/oz falling $27.50 from the previous close. The metal also opened down in the US.

In a recent report, CME Group said that if European debt concerns intensify, precious metal prices could spike higher. At the moment, there isn’t much confidence in a speedy resolution for the EU. But, that still may not be sufficient reason to rush into platinum. Those eyeing the metal should note that although it is characterized as a precious metal, in the minds of many individuals platinum is an industrial metal.

Economic data, especially that from the EU, US and Japan play a fundamental role in the investment plays that are made in platinum. When these economies are coasting or growing, platinum tends to do best. If there is real or suspected economic trouble, platinum hasn’t historically performed as well. Simply put, the safety of investing in platinum is generally linked to the financial health of major economies. However, at the moment, investors are being bombarded with terms like, “slow recovery,” “debt crisis” and “double dip recession.”

However, now historical trends and attitudes toward platinum need to be put into perspective of the untraditional climate that investors are now in. Platinum has also generally held the reputation as being the expensive metal, but gold, the safe haven of choice among the metals, is now trading at equal levels. Furthermore, there are concerns that the gold prices are on an unsustainable path and it may be a bubble waiting to happen. These factors could prompt an increasing number of investors to rethink their strategy and ponder whether platinum is indeed an attractive bargain.

There is optimism about platinum prices. TD Securities, for example, has announced plans to ramp up investment in the metal.

However, a move into platinum is not likely to be an ideal one for safety seekers. Factors such as economic uncertainty and mining wage disputes in South Africa have and may continue to drag the price down. The metal isn’t recommended for quick money seekers either since rapid price increases are not expected. Investment still seems best suited for those who can tolerate the metal’s tortoise rate returns.

As Edel Tully, a UBS analyst, put it in a research note: “if we were prepared to buy…now and hold it for a year or two, it would probably be a good trade, given that platinum’s fundamentals signal a lot more tightness over the medium term. But as investors struggle to make money in the short term, positioning for the medium term is in short supply.”