Should I invest in Platinum futures? I just got an investment advisory letter, that was touting platinum as a long-term investment. The letter argued that:
–demand for platinum (for catalytic converters for cars) is soaring (every Chinaman and Indian wants a car)
–the supply is limited-basically just a few mines in S. Africa, and one or two in Russia
My question is-a few years back I heard that some chemist had gotten an iron-based catalyst to work almost as well as platinum. Does anybody know if this iron catalyst is poised to wreak havoc with the platinum market?
Let me ask you a question - should you base investment decisions on what I or anyone else here tells you?
A few points:
Palladium is also used for catalysts.
I’m pretty sure there are platinum mines in a few other regions, including one in the US.
There are many catalysts that can work in place of platinum, should prices get too high or platinum too scarce. It’s a matter of supply and demand tho.
Precious metals futures have trapped a lot of people based on the “neatness” factor, but I do not believe it would be as wise to invest in them as in other things, such as an S&P 500 tracking fund. I do remember waaaaaaay back in the 1970’s predictions of platinum being “exhausted” by 1990 due to placing catalysts on US autos, and prices of “$10,000 an ounce by 1980” being thrown about. A lot of people bought into platinum when the Hunt brothers drove silver to more than $50 and ounce, and gold briefly topped $1000 an ounce. And those people lost a lot of money. An ex-friend’s parents bought more than $40,000 of silver ingots when silver was at $40 or so an ounce, because “silver was almost gone”. A few years back when silver dipped to $4 an ounce I tried to buy it all from them - but nope, after 20 years of losses, they are still quite certain that the “silver riots” are just around the corner…
I would add to Anthracite that investing in any metal is probably a huge mistake. The earth’s crust is a huge storehouse of metals, all that is required is the energy to process it. Plus, our stockpiles of metals are constantly increasing. Every time an ounce of gold is mined, it adds to the world stockpile. Gold or steel doesn’t vanish when it is “used”, it is still available to be repurposed if the price sttructure changes.
What drove the huge increases in precious metals in the early 80s was fear of inflation creating a huge speculative bubble. “Wow…everyone’s buying gold, and the prices are going up and up! I should buy gold too, since the price is going up.” Then someone noticed just how high the prices were and decided to sell and suddenly everyone is trying to sell and the price plummets. The trouble was that there wasn’t any shortage of gold or any fundamental reason for the increase in demand. Just a pure bubble.
Anyway, although precious metals have their uses, they are not a good long term investment. Sure, they will hold their value, but you have to do BETTER than that for a good investment.
Chiming in as a banker, futures no way make a good investment for an IRA. Futures are highly leveraged and highly volatile instruments used either for hedging or aggressive speculation. Further, they have expiry dates so they don’t just run and run like an equity would. And finally, with futures you either exercise them (ie buy all the platinum you’ve contracted for, which will be a lot) or sell them, they don’t just go away on their own like bought options. So, if yuo have some mad money that you don’t mind totally loosing if this thing goes against you, and if you are sure you’ll be able to off-load the futures then go for it, but no way put them in an IRA and forget about them.
Chiming in as a financial advisor, why would you risk your retirement on any single item? Anyway, the people that wrote that tout letter probably have a vested interest in the platinum market. If you have an extra couple thousand sitting around and you want to speculate wildly, go ahead and have fun. But don’t risk your retirement on it.
Jeezus, no. While all precious metals are, I think, unreasonably low right now, nobody knows when they’ll get higher. Could be tomorrow, could be 5 years from now. Options expire, and you might get left holding the bag. If you want to buy some platinum, try http://www.e-gold.com, which is actually a system of money transfer that’s 100 percent backed by your choice of gold, silver, platinum, or palladium. The exchange prices there are as close as you’ll ever get to “spot” price, and yes, they’ll send you the metal if you want to touch it instead of letting it sit in your account.
Thanks for the advice. The real question is: if Platinum all of a sudden zooms in price, will chemists be able to develop a cheaper substitute? Take silver-its main use is in photographic film and prints-but now we have CCD cameras and laser printers, that will surely threaten silver-based photography! Silver won’t be worth squat once good, low cost CCD cameras are available!
Trust me, sparky, it already did.
When platinum was $350 per ounce within the last year or so, why weren’t these geniuses calling you? Russia is in such turmoil that they aren’t delivering platinum or palladium. This has caused havoc in a market that is very very thin. This could be reversed at any time. Your long-term investment should be grounded in something much less speculative. Period.
OK, I know exactly nothing about the precious metals market or the commodities market in general, but I still know enough to tell you not to listen to the advice in that mailing. The simple reason is that it’s advice in a mailing. If these metal gurus were so certain of the future of the price of platinum, they wouldn’t be wasting their time telling you to buy the stuff, they’d be buying it themselves. Very few people ever actually find get-rich-quick schemes, and the ones that do keep it to themselves. When it comes to finances, you should always ask yourself what’s the other guy’s motive.
I just want to qualify since you wrote this right after I talked of buying the 1000 ounces from my friend’s parents. I wasn’t actually wanting to buy it for an investment, but more for the neatness factor of having 10-100 ounce ingots of silver. I could put them in a chest, partially cover them with a pile of gold Sackie’s, and use it as a prop in my pirate lesbian fantasies…hmmm…
Which in this case is fairly likely to apply. The price of your future is already the market clearing price based on all the big investors who have already baked in their forecast about the supply and demand for platinum. Folks who have fancy models including anticipated catalytic converter production forecasts, production forecasts, etc. You would basically be betting that their forecasts are, on average, wrong. Sure it could happen with a major supply shock, but probably not all that likely. Assets tend to be priced to provide a fair level of return for the risk involved.
Anthracite: Yeah, that sounds cool! But of course, you wouldn’t be buying it as an investment, just 'cause it was cool. If you like running your hands over heaps of precious metals and cackling, “Mine! All Mine! Hahahaha!” then that would be a good reason to buy precious metals. If you think the metals are going to appreciate at a rate greater than inflation that is not a good reason to buy precious metals.
Lemur -
Like Scrooge McDuck - Man would the market punish him today for having all that cash on hand (literally).
Well, let’s see…Unca’ Scrooge had 2 bazillion dollars in his vault in cash in March of 2000. Bill gates was worth 20 bazillion dollars in Microsoft stock.
Today, poor old Scrooge still has 2 bazillion dollars. Bill is worth 10 bazillion dollars in Microsoft stock.
Yep, the market sure punished old Scrooge! :rolleyes:
That’s 10 bazillion in STOCK, not CASH. It’s INVESTED in something that is benefiting the entire economy, not just lying fallow. I know NOTHING about economics and even I know “investment good, hoarding bad.”
I also know a couple other maxims:
“Precious metals are a sucker bet.”
and
“Never invest in anything you hear about from a mass mailing.”
Jeeze, I’m stupid and I know better than to fall for that!
Alas, you forgot Rodgers, Kenny–see, Gambler