OK metal investors: what does the drop in platinum price mean?

[Robb]

Lost half its value since the beginning of the year. Arguably, it's back where it was before the run-up -- at the beginning of the year. :D

I'm not a metals guy, but I'm looking. Fascinating market.

[Joanne98]

1. I have no idea.

[HereSince1628]

2. Maybe a drop in production of electronics and jet engines

Also less chemical manufacturing where platinum is used as a catalyst?

[babylonsister]

3. Per DH, "don't mean shit". Gold and silver are also down.

He likes coins; don't know if that means anything either, except he collects and sells them.

[madrchsod]

4. drop in demand for catalytic converters

more recycling of used converters

[Joanne98]

6. That could be. I don't follow metals that much but I think gold will go up

in the next few months because the Fed has printed so much money people will buy it as a hedge against inflation.

[Billy Burnett]

8. Palladium is used for catalytic converters, not platinum.

Palladium is in a group of metals known as Platinum Group metals - Platinum, Palladium, Rhodium, Ruthenium, Osmium, and Iridium.


:hi:

[azul]

12. Palladium can be used for diesels only.

Cannot be substituted in gas engines.

[Art_from_Ark]

19. You are both off

Both platinum and palladium are used in both diesel and gas catalytic converters. Rhodium is often a third component. And gold might come into use in some diesel catalytic converters

See, for example,
http://auto.howstuffworks.com/catalytic-converter.htm/printable

http://www.freepatentsonline.com/5106588.html

and

http://www.mineweb.net/mineweb/view/mineweb/en/page34?oid=21647&sn=Detail

Although at least as recently as 2004, platinum alone was considered as the only suitable material for diesel converters

http://findarticles.com/p/articles/mi_m0KWH/is_6_42/ai_n6094733/pg_1?tag=artBody;col1

[azul]

9. Signals electic cars are near.

The price was run up because of a limited supply when it was needed in the booming car market for catalytic converters. With auto financing and world economic growth slowing, ICE auto production is rapidly declining despite the fall in gas prices.

The price had also been climbing in anticipation for the possible demand for fuel cell use. Cheaper alternatives for platinum for both catalytic converters and for fuel cells are being developed and may soon reduce that demand also.

It is about the most useful metal in chemistry and jewelry and should have a relatively high intrinsic value. But now values mainly as a safe haven investment, but not a quite so speculatively useful metal.

I hope that it is a sign that we are being weened out of the dirty and destructive oil business willy-nilly. By green speculators that are looking elsewhere for opportunities.

[POAS]

5. Not an expert but I'd say

supply and demand at play.

Look at it's uses; spark plugs, catalytic converters, jewelry to name a few.

[Orrex]

7. It signals a decline in big-game hunting

I shoot the Hippopotamus
With bullets made of platinum,
Because if I use leaden ones
His hide is sure to flatten 'em.
http://en.wikiquote.org/wiki/Hilaire_Belloc">Hilaire Belloc, "The Hippopotamus"

[abelenkpe]

10. deflation

Hedge funds are still unwinding selling assets like platinum which lowers the price. Also industrial demand is drying up as deflation sets in with people buying less and companies producing less. Atleast that's what I've read as one reason for the drop in prices of platinum and copper. The market, er all markets, seem like Mr. Toad's Wild Ride. Good luck!

[HamdenRice]

11. The speculative commodities bubble burst

Beginning in 2007, as the subprime crisis first hit and mortgage backed securities became unmarketable, institutional investors and hedge funds began dumping financial assets and buying (speculating in) commodities. That caused a run up in oil futures, gold, platinum and other commodities.

The second phase of the crisis has been a liquidity crisis with all kinds of funds and investors dumping all kinds of assets to raise cash or stash value in the only safe investment -- t bills.

There has been a similar drastic rise and collapse in prices in lots of commodities.

With all this happening at once, we are facing a risk of general deflation, if we're not already there.

[Hawkowl]

13. Guessing

I'm guessing that the Farm bill passing in June of 2008 which tightened the rules regarding speculation in several markets at the same time is responsible. This is the major reason oil is down. Entities were taking positions in say oil in the U.S. and then once the market closed, bidding up another position in the Asian market, then bidding it up in the U.S. etc. etc. Essentially these few speculators were bidding against themselves.

Looking at the graph of the price rise, it is a classical depiction of a price bubble. It does look like the bubble has deflated and now it's just a matter of picking the right time when the price will start to rise again. None too soon is my guess. It also looks like the precipitous drop began in July of 2008 which does correlate with the Farm Bill passage.

Contributing factors could be that the world market views deflation much, much more likely than inflation so there is no reason to hedge against inflation through precious metals, or commodities at large. People are just going to pull their money and wait on the sidelines until commodity prices stop falling.

Again this is just my guess. Reasons why markets do the things they do are arguable. What they actually are doing, i.e; dropping like a stone, are not.

[Warpy]

14. All commodities had a run up as people left stocks

at the beginning of the year. Everything crashed when hedge funds started to dump their assets last summer in advance of a run, a run that did materialize.

[siligut]

18. Yes, and more will probably be dumped by countries whose currency is dropping.

And as manufacturing dies down so will the need for raw materials.

[Blue Meany]

15. It should go up and down with gold since it is added to

gold for some uses, such as jewelry and fillings.

[TomClash]

16. There's general decline in commodities nt

[SlowDownFast]

17. Deleveraging, unwinding, deleveraging.

Hedge funds/investors selling EVERYTHING - including precious metals positions - to meet cash demands/requirements.

The reason for platinum near-parity with gold is that gold IS HOLDING UP BETTER, with it's history as a store of wealth during economic hardships.

Look at any stock or commodity and their recent declines (due to deleveraging) and compare their losses to gold's.

Gold ain't really a commodity - just ask anyone in Switzerland who is able to go to any one of their local banks and trade Euros, dollars, etc for gold bullion and vice versa.

Not saying it's not good to hold platinum or that platinum will continue it's downward slide into the abyss (I believe when commodities start to climb due to inflation - after this deflation bit - platinum will climb with them), but put simply: GOLD IS BETTER.

Gold and cash.