First off, platinum is scarce, so supply is severely limited. Secondly, it is used extensively in commercial products--most notably catalytic converters. For those who are not car savvy, catalytic converters help to limit the amount of pollution cars produce. Since the world is only heading towards tighter environmental regulation, it is unlikely that catalytic converters are going away any time soon. Lastly, platinum is used in jewelry, where it is quite the status symbol.
On the other side of the debate, one could strongly argue that the price of platinum is being artificially inflated because of the current hostile climate in the main mining areas. In addition, the argument could also be made that, as the price of platinum continues to increase, manufactures will look to platinum alternatives for catalytic converters. Palladium can also be used in converters, but it does not work quite as well as platinum. The price differential between the two metals could possibly lead to a switch in the future, though. Once a manufacturer has made the switch, it may not be easy to switch back later if the price of platinum becomes more reasonable, which could possibly lead to a major drop in platinum's price.
Platinum, as with most precious metals right now, is experiencing a bull market. There certainly is a case to be made for a continued bull market in platinum. On the other hand, it can also be argued that the metal is overvalued. Only time will tell, but if you are interested in learning more, read our article about Platinum Investment.
Labels: investments
