Is Now The Time To Invest In Platinum?

Wednesday, February 10, 2016

Platinum, like most other precious metals, was sitting on top of the world in 2011. However, since then, the price of the commodity has been falling in a big way. However, recent  developments indicate that gains may be on the way. Today, we'll talk about the factors that play a role in the price of platinum, what's going on with those factors and what we can expect to see from platinum moving forward. So, let's get right to it...

Factors That Play A Role In The Price Of Platinum

Platinum is a very interesting commodity. While like most commodities, it is at the mercy of supply and demand, there's a bit of complexity in gauging price movements as a result of the fact that platinum is considered a precious metal. This means that it is a safe haven investment. In basic sense, when supply of the precious metal is low and demand is high, the value of platinum rises. When the supply of the precious metal is high and demand is low, the value of platinum will fall. Also, because of the fact that platinum is a safe haven investment, market conditions play a role in demand for the precious metal. When the market is performing poorly, the value of platinum rises as investors increase demand.

Platinum Supply

As mentioned above, the gauge where the value of platinum is headed, it's important to pay close attention to supply and demand. So, let's start with the first half of the equation, supply. This is where things start to get interesting. As mentioned above, the value of platinum has been falling for quite some time. At this point, we've seen declines in the value of the commodity for nearly five years. Pricing ultimately plays a role in the supply of any commodity. After all, it costs money to mine for precious metals. So, when the price of the metal falls below the tipping point where it will be profitable to mine, mines start to shut down. This is what we're seeing at the moment. There are several mines that are reducing production or shutting down all together. As a result, supplies of platinum are starting to shrink. As the law of supply and demand dictates, the reduction in supply signifies that we're going to see an increase in price.

Demand For Platinum

In terms of demand, we're also starting to see movement. While consumer demand is remaining relatively flat, consumer demand isn't the only type of demand for the metal. As stated above, investor demand plays a big role. Because platinum is a precious metal, when the stock market is seeing declines, we tend to see gains in the value of the metal as investors flock to it in an attempt to keep their money safe. Well, look around my friends, the market is performing incredibly poorly at the moment. In fact, since the first day of trading, we've seen drastic declines in the market values of just about any stock. As a result, investors are starting to buy more platinum, leading to an increase in the value of the precious metal.

Where Platinum Is Headed From Here

Whether we talk about gold, silver, or platinum, my opinion is about the same. I'm expecting to see incredibly bullish activity. The reality is that with the drastic declines in value that we've seen from precious metals over the past several years, production is slowing down and supporting price growth. That combined with increased demand for precious metals will send prices soaring.

What Do You Think?

Joshua Rodriguez

Joshua Rodriguez is an avid financial professional. He is the owner and founder of CNA Finance, a partner at Modest Money, and a writer for US News & World Report, Investing.com, and more! Joshua takes a strong fundamental approach to market analysis and enjoys offering his take on what we can expect moving forward. You can reach Joshua at cnafinancehelp@gmail.com.