Platinum On The March?!

Over the past few weeks, some of my friends in the precious metals community have noted NICE price action ("price moving up") in platinum.  See below charts from kitco.com for the price over the past 30 days:

The price of platinum has risen from $1551 per oz to $1734 (up 11.7%), a pretty decent run.  Much of this is probably due to platinum production problems and labor problems in South Africa, the world's number one producer.  Car sales (the biggest end-user of platinum) are apparently up in the very important market of China as well (caution must be used with any data from CHINA, like I have to tell you guys that?).

Compare platinum with gold over the same 30 days:

Gold is about $1675 per oz (up only 1.5%, and off its recent high of $1690).  So, OK, "fundamentals" (problems in Pt production in South Africa) might explain this price movement in platinum.

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Platinum has almost always sold at a premium to gold historically  Over the past four or so years, however, platinum and gold have moved together, almost a 100% correlation:

Note, however, that platinum was MUCH higher than gold was ($2000 - $2200 per oz vs. gold at $900 - $1000) soon before the financial crisis really got going in 2008.

I do not have historical information handy, but platinum through history has sold at some 50% higher (or so, readers are invited to correct me!) on the average than gold.

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 I would now invite reader scrutiny of the above platinum charts.  Is the recent move in platinum really all that much?  I would say "No", not really.  Note that platinum has been in a trading range of $1400 - $1950 since about October 2009!

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For our interest, let's look at palladium, "platinum's little sister".  Pd is also used as a catalyst in (some) cars, and does have some interesting properties as well (see my article on the platinum group metals here.).

Palladium is up some 14.8% in the past month.  And the past 5 years?

Now THERE'S an interesting chart!  Palladium (more than five years ago, so I do not have handy access to the pricing data) was well over $1000 / oz because Ford had bought up a whole lot of it based on the Russians saying it was "scarce", I read that Ford took a $1 billion (or more) loss on their palladium, whoops!  But, look where we could have bought palladium in late 2008, as low as under $200...

And just to finish up what kitco.com has re platinum group metals, here are the same charts for rhodium:

Do you think that rhodium does not move around much?  How about this (past five years):

Yow!

From $10,000 at its peak, to $1225 now!  Now THAT is a swan dive!  It went off the cliff in the financial crisis in 2008.  Bet you are glad you didn't buy any back then!

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My main point in this article is that the recent moves in platinum appear to me to be nothing unusual.


N. N. Taleb, in his new book Antifragile warns us to watch out for the noise when looking for the signal...  And, as I mentioned before recently (http://robertmixblog.blogspot.com/2013/01/stocks-have-been-performing-well.html), "cherry-picking dates matters" a lot!  Yes, production problems in South Africa (appear to) have affected the recent price in platinum, but the price movements by historical standards is NOT impressive.

I am NOT poo-poo-ing platinum!  I own some and love it!  And there is an argument for saying its price future may be better than gold (although King Gold will win in the end).

Update:

Contributor "Benjamen" at pmbug.com supplied me the below historical chart showing price of platinum (top), gold (middle) and the platinum:gold price ratio (bottom) for the years 1976 - 2005.  While there is considerable variation in that ratio, it works out to about an average of 1.3: 1.0.  The ratio is now about 0.95:1.0 (platinum is relatively cheap by historical standards).  Thanks, Benjamen!