Platinum - who's buying?

[KDave]

Platinum demand for investment in 2016 was 7% of total. Last year it was 3%. Jewellery is a third and has stayed static for the past decade demand wise so it is popular as a precious metal, but not the extent of gold. Interestingly jewellery demand for gold is a third last time I looked. It's not far off at any rate. The jewellery market is very important for all precious metals, but seems to remain static as a proportion of demand for reasons I don't yet understand. 

The picture is driven therefore by platinum utility in industry, same as for silver. Gold has a lot of investment demand, silver does too to a lesser degree. Platinum can't really be put in that category with single digit demand. But you never know. I'm bullish on pt for its ratio and industry case. I could be wrong.

[vand]

I'm pretty sure that Dom Frisby lurks on this forum. Or at least he frequents a lot of the same news sources and channels as me..

https://moneyweek.com/platinum-is-cheap-but-will-it-ever-get-expensive-again/

[KDave]

6 hours ago, vand said:

I'm pretty sure that Dom Frisby lurks on this forum. Or at least he frequents a lot of the same news sources and channels as me..

https://moneyweek.com/platinum-is-cheap-but-will-it-ever-get-expensive-again/

Yes I got his email on the subject and had the same reaction. If everyone is looking at platinum it must be time to sell surely? 

[vand]

4 hours ago, KDave said:

Yes I got his email on the subject and had the same reaction. If everyone is looking at platinum it must be time to sell surely? 

I thin he’s quite good at this major-trend change malarkey, but is usually a bit early when he first starts writing about it. He made a very good call on GBP’s multi-year bottom.. similar to what some of us were mulling about a year or so ago!

[Pipers]

Dom Friisby is normally very early on these things, it's good to see someone else apart from us talking about platinum, though I can see it being a long time before any action taking place. 

[vand]

The recent sell off in PMs has pushed Pt prices down to silly levels, so I have decided that I'm going to pull the trigger and actually buy a few Oz of physical Pt.

GS.be's cheapest 1oz is 7.6% premium to spot.. that'll do nicely!
 

[vand]

Pt has hit below extraction cost, miners have gone long on futures, with hedgies record short:

https://seekingalpha.com/article/4198588-platinum-miners-long-platinum-well

 

What does it all mean...? we'll find out soon, I guess. 

[PolarPanda]

I decided to buy some platinum Brit's today. Curious about the 1/10 OZ! 

[Gildeon]

Won my first Platinum Britannia (and also my first Platinum coin in general) in an auction.

I am afraid that it will not be my last! 😁

[Fastnick]

Am watching the price of 1oz Platinum Britannias on gs.be very closely these days; might decide to jump in and get one for the next group order, specially at the Pound has improved a little bit lately.....

[vand]

 

Those 10yr Expected Returns charts are screaming BUY

[vand]

GS.be seem to have raised their premium on the 1oz Pt Brits.. now they're around 10%. Maybe a sign that the physical buyers are coming in. Of course, in such a small illiquid market it wouldn't take a lot!

[FoolzGold]

The margins on platinum at GSBe look pretty stable to me. At least they've haven't changed significantly since the last time I checked them maybe a month or two ago. That applies to the Maple Leaf, Britannia, and QB Dragon and Griffin.

The only exception is the QB Lion, which was just under 12% but which has now climbed to around 16%. As the oldest release this makes sense.

[vand]

http://www.mining.com/web/case-investing-platinum/

 

"The South African cost of production, the average price of cash cost is $950 per ton or the all-in sustaining costs are $1,100 per ounce. So it's costing $1,100 per ounce of platinum to pull it out of a mine in South Africa"

[vand]

To me, Pt combines the best of both gold & silver:

 

- much more concentrated that silver for storage; 1oz Pt = 55 oz gold

- Doesn't milkspot

- Lower premium than Au (7.6%)

- More undervalued than even Au

 

Only real issue is the illiquidity if you want to dump your physical. For me this is something I'm happy with. I have lots of Ag that I would offload before Pt. Besides, I think this will be something that you need to patiently sit on for a few years while prices readjust. My belief is that, Au, Ag, Pt or any other PMs will be much easier to see all round, as we will see new platforms develop that make buying and selling Physical PMs easier which also take on board premium values.

[vand]

 

[vand]

How much does it cost to pull the stuff out of the ground?

Remember how low oil prices were in 2016.. fast forward to 2018 and I would expect those costs to have risen again.

 

[augur]

On 16/09/2018 at 10:17, vand said:

much more concentrated than silver for storage; 1oz Pt = 55 oz Ag

more undervalued than even Au

just to demonstrate your point (in this case both items cost actually about the same)

[augur]

20 minutes ago, vand said:

How much does it cost to pull the stuff out of the ground?

 

The fact that world production costs are falling (despite stable costs in each region) leads to the conclusion that outside Russia less and less is mined at the current spot prices, doesn't it?

[vand]

4 hours ago, augur said:

The fact that world production costs are falling (despite stable costs in each region) leads to the conclusion that outside Russia less and less is mined at the current spot prices, doesn't it?

The main cost of extraction is energy costs, which fell as commodities and oil in particular crashed between 2014 - 2016. 

I'd wager that updated numbers would show costs are going back up. 

Less is mined at the current price because 1. demand is lower, and 2. it's unprofitable to mine at current price, ergo supply is rebalancing.

As the say, the cure for lower prices is... low prices

[Lowlow]

On 18/09/2018 at 12:11, vand said:

As the say, the cure for lower prices is... low prices

 

[vand]

Plotting the Platinum/Gold ratio vs subsequent 5yr & 10yr performance since 1968:

5yr:

 

10yr:

 

Let's look at the some other periods where Pt/Gold ratio has been very stretched:

 

Month

Platinum

Gold

Pt/Gold Ratio

10 yr Relative Performance %

5 yr Relative Performance %

 

Jun-82	276	314.961	1.141163043	2.0%	3.7%
Jul-82	286	337.895	1.181451049	2.4%	4.1%
Aug-82	309	363.413	1.176093851	1.9%	4.5%
Sep-82	325	438.15	1.348153846	3.5%	5.6%
Oct-82	342	422.786	1.236216374	2.5%	4.1%
Nov-82	341	415.114	1.217343109	2.5%	2.5%
Dec-82	359	444.776	1.238930362	2.9%	2.4%

 

Mar-85	260	303.205	1.166173077	2.3%	3.9%
Apr-85	282	324.883	1.152067376	2.8%	3.9%
May-85	272	316.395	1.163216912	2.7%	4.3%
Jun-85	264	316.298	1.198098485	3.0%	5.0%
Jul-85	269	317.202	1.179189591	2.8%	4.5%

 

Sep-11	1511	1780.648	1.178456651		-0.8%
Oct-11	1606	1667.893	1.038538605		-2.2%
Nov-11	1558	1735.977	1.114234275		-1.3%
Dec-11	1354	1652.725	1.220624077		-0.4%

 

 

It will be very interesting to see in 10 years' time where both metals are in relation to each other. The current extremity in the Pt/Au is really quite staggering - far longer and more extreme that the 3 time periods I have highlighted, and if the statistical model's correlation holds up anywhere near then we can expect Pt to do very well indeed.

 

 

[Lowlow]

15 hours ago, vand said:

It will be very interesting to see in 10 years' time where both metals are in relation to each other. The current extremity in the Pt/Au is really quite staggering - far longer and more extreme that the 3 time periods I have highlighted, and if the statistical model's correlation holds up anywhere near then we can expect Pt to do very well indeed.

Personally I think what is more interesting is the platinum silver ratio, which is relatively stable for the past 10+ years.  To me that says it isn't platinum or silver that is the outlier.

[vand]

These scatterplots are wonderful 😉

Here is 5 &10yr Gold/Silver scatter charts:

 

We can see that since 1968, if you had bought silver at any point above GSR ~77, you would have outperformed gold over the subsequent 5 & 10 years, and if you zoom out to 10yr period then anything above about GSR ~63 there are far more points above the 0% boundary than below... pretty easy to conclude which metal to focus on based on these numbers. I would give bias the number slightly in favour of gold to account for its long term outperformance and say that anything about GSR~67-68 is currently a great/great buy.

Below ~60 the case is much less strong for favouring silver.

[vand]

And of course... Platinum/Silver scattercharts: