Scandals, Strikes and First-Year Issue Coins: The Story Behind Platinum and Palladium

By Teri Lee

Here’s some good news. While platinum and palladium are actually rarer than gold, they are less expensive to purchase right now. Platinum and palladium demand is slated for an upswing through their use in pollution control and medical instruments. Further, platinum and palladium prices are affected by three primary factors which separate them from the precious metals market:

1. The industrial and jewelry demand for both metals
2. Mining interests
3. Commodity metals prices

These factors, and the reasons behind them, make investing in platinum and palladium an excellent value right now.

We include platinum and palladium in our Baker’s Dozen of core offerings for a balanced portfolio, and suggest you seriously consider investing in platinum and palladium while prices are still low.

Why Platinum and Palladium?

#1. They are undervalued considering their use in industry and fashion

30% of all platinum and 10% of all palladium mined is used to make jewelry. Right now, boomers are not buying jewelry, while younger generations are just discovering this alternative to gold. And, while platinum and palladium may be on temporary ‘fashion hold,’ new and exciting industrial uses are on the horizon.

Platinum is helping to fight cancer through its use in chemotherapy, and palladium is used in surgical equipment due to its better durability compared to platinum. They also have uses in archival photography, electrodes and thermometers. But, nowhere are these metals more instrumental than in the automobile catalytic converter, accounting for roughly 50% of annual global demand.

The Pollution Connection

Platinum and palladium are key elements in catalytic converters used to reduce carbon emissions from automobiles. These metals will continue experiencing demand as governments create and enforce anti-pollution laws and regulations.

Regulations are expected to land especially hard on Europe’s diesel-powered vehicles. These vehicles use more platinum for emission control than do gasoline engines, which use more palladium.

The Volkswagen Scandal Temporarily Depressed Demand

Last year, the United States accused the German firm Volkswagen of using software for diesel cars that deceived regulators measuring toxic emissions. Volkswagen sales fell, depressing the demand for diesel catalytic converters. These converters account for about 45% of global platinum consumption. Platinum prices were pushed to a 6 1/2 year low. Even though palladium was not involved in the scandal, the shock in the commodities prices also pushed its prices down.

Some analysts are concerned that Volkswagen's scandal changed consumer attitudes about diesel automobiles. However, most believe the long term environmental issues highlighted by the scandal will result in even tighter emission standards and the increased use of platinum and palladium.

#2. Mining and Economic problems decrease supply

South Africa accounts for the majority of the world's platinum supply and the second-largest supply of palladium. Russia is the second largest producer of platinum and largest producer of palladium.

South Africa’s platinum industry has been mired by problems that have contributed to high production costs. In fact, these costs are now almost level with platinum’s sale price. South African mines are unlikely to deliver enough platinum to meet demand in the near term.

In 2014, more than 70,000 platinum industry workers went on a five-month strike, one that became the longest and costliest in the country’s history. The workers were all employees of the world’s three-biggest platinum producers: Anglo American Platinum, Impala Platinum, and Lonmin. The losses that resulted from the strike proved to be catastrophic for the platinum industry in South Africa.

With platinum selling for under $1,000 per ounce, South African mines cannot cover most of their cash costs, capital contributions and exploration costs. This paints a troubling supply picture, but an encouraging future profit outlook as industrial demand increases.

As for Russia, the economic sanctions imposed on the country as a result of its 2014 annexation of Crimea, along with low palladium prices, have caused fears of potential decrease in palladium production. The growing demand in the auto industry for palladium catalytic converters is increasing worldwide palladium demand. The overall shortages and increasing demand makes both platinum and palladium attractive metals to invest in while prices are very low.

#3. The effect of commodity trading

Platinum and palladium are traded on the COMEX commodities index. Futures’ trading of platinum and palladium is affected by the price of commodity metals as a whole. A slowdown in manufacturing in the U.S. and abroad has resulted in a temporary trading price decrease. As economies recover, we should see a price rise across the board of commodity metals.

Our Take on Platinum and Palladium

Given the supply and demand factors for platinum and palladium right now, both metals are worthy of consideration for inclusion in your portfolio. If we had to choose one over the other, we’d give the nod to platinum for two reasons…

1. Platinum is 15 times more rare than gold and usually trades at about a 20% premium to the gold price. Yet, it has traded below the price of gold since early 2013. Platinum is inexpensive.
2. The Austrian Mint has released a limited number of Platinum Philharmonic coins on the market. This 2016 issue is the first year of issue for the beautiful coin. And, we have some set aside for you.

The Story Behind the Beautiful Philharmonic

Since its inception in 1989, the Austrian Philharmonic has twice been the best-selling bullion coin worldwide. The coin depicts the Great Organ of Vienna’s Golden Hall (The Musikverein), and features an array of musical instruments: a violin, cello, harp, bassoon and French horn. The motive behind this award-winning design was a desire to pay homage to Austria’s rich contribution to the world of classical music.

First struck in gold, the Austrian Mint released the silver Philharmonic in 2002. Just two months ago, a one-ounce platinum variant of the popular coin was issued. However, these coins are in low supply and difficult to obtain.

ASI is pleased to offer you the opportunity to own one of these highly sought-after coins. The platinum Philharmonic is in its first year of issue, and therefore in high demand. However, you have the chance to be one of the lucky few investors that will get their hands on platinum Philharmonics in 2016.

We have only 100 Platinum Philharmonics for our clients. And as part of this, we are offering them for your portfolio at 7.9% over spot.*

To add these platinum coins, or other platinum/palladium products to your portfolio, call an ASI Preferred Client Relations representative at 800-831-0007.

*Prices are subject to change based upon product availability and due to market fluctuation. Offer good while supplies last.