In the first 13 years of the new Millennium, gold and silver are up nearly 500 percent, while platinum is up only 300 percent, but platinum has made a big move early this year, up 11 percent, while gold is flat. That divergence comes from the fact that platinum is a much narrower market than gold — about 30-fold more rare than gold — so any potential disruptions of supply tend to push platinum’s price up rapidly.
Some recent strikes in the South African mines have added to platinum’s short-term price increases, but even without those strikes, the South African mines are drying up, causing much higher operating costs and shrinking profit margins.
On the demand side, automobile production is increasing, fueling rising demand for platinum in catalytic converters. Since 35 percent of platinum demand goes into catalytic converters, the rise of vehicle production around the world is bullish for platinum. In the United States, car production rose to an annual rate of 15.1 million units last quarter, up 11.6 percent from the fourth quarter in 2011. In China, auto sales rose 4.3 percent to 19.3 million units last year, according to Bloomberg. For this year, China’s Association of Automobile Manufacturers forecasts a 7 percent rise to 20.65 million new vehicles. In addition, many Asians seek out platinum jewelry.
Platinum’s recent rise has caused some major global banks to revise their 2013 price forecasts. Bank of America Merrill Lynch sees a rise in platinum to $1,800 by June 30, an 18 percent rise in the first half of the year. Credit Suisse sees $1,770 by the end of the year, while Barclays predicts $1,750. However, this is typical mainstream Wall Street group-think. When banks and Wall Street firms see prices going up, they often predict more of the same.
Standard Bank Notes Unusually High Gold Demand
Standard Bank reported this week that it is seeing an unusually strong gold demand early into 2013, with “good buying” from Southeast Asia. The January gold fever is not a typical seasonal pattern.
Part of the surge can be attributed to demand from India, as buyers rushed to buy gold before an expected increase in import duties on gold. “It was strong in November and that’s normally a usual seasonal pattern that we see coming through from Indian post-monsoon, wedding season buying,” Marc Ground, a commodity strategist at Standard Bank in Johannesburg. “The fact that January is as high as we see in November usually, that’s unusual. There was probably some Indian buying ahead of this tariff increase.”
Russian Central Bank to Continue Buying Gold, Official Says
It’s official: Russia will keep on dumping paper currency in exchange for gold.
This week, First Deputy Chairman Alexei Ulyukayev stated clearly that the Russian central bank would continue to buy gold to diversify its foreign reserves away from paper assets viewed as “risky” (including the U.S. dollar). Russia now has the world’s fourth-largest stash of gold, worth $530 billion.
Ulyukayev, speaking during the World Economic Forum in Davos, Switzerland, said the central bank would continue to buy gold, but gave no indication on whether there would be any change in the share of its reserves it allocates to the precious metal. “We are buying metal and will continue to pursue this course,” Ulyukayev told reporters. “This is a course of asset diversification in a situation when investing in securities or deposits remains risky.”
Also this week, the Central Bank of the Russian Federation posted on its website that it bought 600,000 ounces of gold in December, bringing its total gold reserves to an estimated 3.2 million ounces.
I Met Texas Attorney General (and future Governor?) Greg Abbott Last Month
Last month, I was one of about 30 business leaders in Southeast Texas to be invited to meet with Texas Attorney General Greg Abbott in Beaumont. We discussed important issues with Abbott for over an hour. We were able to ask questions about the status of Obamacare in Texas, Second Amendment issues, freedom of religion and other issues. We were also able to hear his strong vision for the state of Texas and the country.
We all appreciated that Abbott took the time to meet with us. This is something politicians in Washington should do more often!
About the Author: Mike Fuljenz
Mike Fuljenz is a member of the Moneynews Financial Brain Trust. Click Here to read more of his articles. He is also the editor of the NLG award winning Michael Fuljenz Metals Market Weekly Report. Discover more by Clicking Here Now.
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