woensdag 26 september 2012

Long Idea: Platinum!

In an interview from Peter Schiff on 25-September-2012 with the CEO of Sandstorm Gold, Nolan Watson, I noticed that platinum production costs are now almost the same as the platinum price. This is very significant as every price drop in platinum will render platinum mines nonviable for business.

Figure 1: Price versus Operating Cost (Gold, Silver, Platinum, Palladium)

Several articles like these have popped up recently and it's almost certain that the platinum price will go up due to supply concerns. South African miners are very inefficient and their costs are rising rapidly due to inflation.

Nolan Watson told us that the price of gold hasn't kept pace with rising inflation. This means that the gold price should already be at $2000/ounce just to be on par with the inflation as compared to 4 years ago. Basically this means that gold is now cheaper than 4 years ago if we count in inflation.

And platinum will be even better!

Just look at the platinum gold ratio (Chart 1). It is forming a bottom and should go higher, meaning higher prices of platinum versus gold.

I will be long platinum for the time being.

Chart 1: Platinum Gold Ratio

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