Platinum Liquidity Increases

Posted 14 Jul 2009

Gold is the primary tangible monetary asset because of the large above ground stockpiles.  It is primarily produced to be hoarded not consumed.  The other quasi-monetary commodities are silver, platinum, palladium and copper.  The role of the precious metals will be markedly different in the Information Age than during the Industrial Age.


Platinum is a silvery-white metallic element with the symbol PT.  Platinum does not have a vast history like gold or silver.  A reason may be because its melting point is 1,768.3 °C or 3,214.9 °F compared to gold's 1,064.18 °C or 1,947.52 °F; or silver's 961.78 °C or 1,763.2 °F.

 If you thought silver or gold was hard to smelt then platinum must really surprise you.  Think of how much energy it must take to convert platinum ore into a salable bar or coin.

As Mary Elvira Weeks observes in Discovery Of The Elements, the first European reference to platinum appears in 1557 in the writings of the Italian humanist Julius Caesar Scaliger who described the unknown noble metal found between Darién and Mexico as one "which no fire nor any Spanish artifice has yet been able to liquefy."  Even the name platinum has Spanish roots being derived from an expression for silver; la plata


Platinum has many industrial applications.  The bulk of production is used for catalytic converters in the automotive industry.  Ironically, usually the greener the car the more platinum it takes for the emissions control.

According to the USGS 2006 Minerals Yearbook of the 239 tonnes of platinum sold in 2006, 130 tonnes were used for automobile emissions control devices, 49 tonnes were used for jewelry, 13.3 tonnes were used in electronics, and 11.2 tonnes were used by the chemical industry as a catalyst.

The remaining 35.5 tonnes produced were used in various other minor applications, such as electrodes, anticancer drugs, oxygen sensors, spark plugs and turbine engines


In 2006 South Africa accounted for 77% of world platinum production with about 170 metric tons.  South Africa appears to be muddling through their power shortages.  Thus total annual world production is about 7 million ounces or a mere 10% of the world's annual gold production of 76 million ounces.  Seven million platinum ounces at the current spot price is about $7.8B.

So let me get this right.  The total above ground gold stockpiles are about 160,000 tons and increasing at approximately 2,400 tons per year.  There are no significant above-ground platinum stockpiles like gold or silver and annual production is a mere 220 tons or so and valued at about $7.5B.  On the other hand, over the past year the Adjusted Monetary Base for FRN$ has increased from about $800B to over $1.6T in approximately 8 months.


Like silver and despite reduced production from the electricity problems this extremely rare precious metal appears to be fairly cheap.

The reason is likely on the demand side.  Automotive sales have fallen off a cliff.  The general economic slowdown is reducing demand for this precious industrial metal.  Nevertheless, Obama's 'green economy' will likely require significant amounts of physical platinum bullion to be consumed.

Platinum producers are extremely rare.  There is Angloplat (AMSJ.J) which produced 2.5M ounces in 2007, Impala Platinum (IMPJ.J) which produced 1.9M ounces for year ending 30 June 2008, Lonmin and Norilsk Nickel (GMKN.MM).  Stillwater Mining Company (SMC) is the only one domestic United States platinum producer and they are majority owned by the Russian Norilsk.

 With commodity producers there tends to be a leveraged effect on earnings relative to the commodity price.  Consequently, a significant rise in platinum without hedging will tend to exponentially affect their bottom line either positively or negatively.

For those ahead of the curve who see platinum's role changing in the Information Age there is likely significant value to be made.  While most people will likely still be wondering how to buy gold or silver you may already be using platinum in ordinary daily transactions.


In November 1983 the Isle of Man was the first nation to mint a legal tender platinum coin the Nobel.  They were followed by the (sic) Australia's platinum Koala, Canada's platinum Maple Leaf, China's platinum Panda, the British Royal Mint's platinum Britannia and Russia, who was the first to mint platinum coins in the 19th century, have since made the Russian Ballet series .

 Under 31 U.S.C. § 5112 (k):

The Secretary may mint and issue platinum bullion coins and proof platinum coins in accordance with such specifications, designs, varieties, quantities, denominations, and inscriptions as the Secretary, in the Secretary’s discretion, may prescribe from time to time.

In 1997 the United States the $100 Platinum American Eagle which, according to the United States Mint, may be included in IRAs.  But generally the premiums for these platinum coins does not make them very attractive investments.  Their legal tender status throws even more confusion into the mix of answering the question:  What is a Dollar?

From a monetary science analysis the same assertions and logic used to define gold as money are applicable to silver or platinum.  Consequently, like gold, at all times and in all circumstances platinum remains money.


It appears that the same paper problem which plauge gold and silver likewise affects platinum although not to the same degree.  Platinum has been steadily increasing for decades.  Bob H Takai, Deputy General Manager of the Commodity Business Department for Sumitomo Corporation remarked:

Next, let's look at the platinum market which is the most successful contract in the history of Japanese futures industry (the TOCOM).  In 1985 when the contract was launched, the annual trade volume was a mere 430 mt, which had skyrocketed to 9,240 mt, more than a 20-gold, by 1998 .... Daily trade volume was 30 mt [Note:  About 1.1M ounces or $1.2B], which compares with annual import figure of 50 mt.

The Swiss have launched a platinum ETF, which I have not thoroughly researched to determine if it has the same structural deficiencies as the GLD ETF, and both its holdings and volume have been increasing at healthy rates.


In the Information Age digital commodity currencies, like GoldMoney, allow any metal to be turned into a digital commodity currency and easily used in ordinary daily transactions.  Want to make payments with gold, silver or platinum for a can of soda, automobile, aircraft or anything else?  There is an app for that on the Apple iPhone.

The process completely removes payment risk from cash balances and counter-party risk because the metals are held in bailment instead of on depsoit with a fractional reserve institution.  While they currently only have about 12,000 users with over $630M in precious metals; 10 July 2009 the platinum feature was released and that is 12,000 more people who can easily use platinum in ordinary daily transactions.  This monetary evolution is a prime example why the barbarous relic called the Federal Reserve should be razed.

The premier digital commodity currency, GoldMoney, now allows platinum to be easily used in ordinary daily transactions and as a cash balance.  Their puny 12,000 user-base could purchase the entire annual platinum production with $625,000 each which would put them above the FDIC's $250,000 limit.


During The Great Credit Contraction capital will seek safety and liquidity.  Platinum, a tangible asset, is incredibly safe and has now gotten more liquid.  There is a miniscule amount of platinum compared to the illusions in the liquidity pyramid.

For example, the annual worldwide platinum production is valued at about $7.8B compared to the FDIC's $13B of reserves to cover $4,831B of insured deposits.  In other words, current FDIC insured deposits are greater than 62,000% more than annual worldwide platinum production and about equal to the total above ground stockpiles of physical gold bullion.

Like silver, platinum currently appears to be fairly undervalued and will likely return to its 2:1 ratio with gold.  Much of this demand will likely come from investors and holders of capital seeking safety for their cash balances.  A mere 0.16% of FDIC insured deposits would purchase the entire annual worldwide platinum production.  

Because of the generally accepted fair value lying standards anyone who thinks their cash is safe in an FDIC bank needs a mind transplant.

If anyone purchases some platinum and wants to use it in an ordinary daily transaction then contact me.  My assistant just returned with some printed copies of The Great Credit Contraction I can sign; so we can work out a deal that may include a discount because of lower costs.

Like freedom must bubble up from the people; so likewise must a commodity currency standard.  This is an example of how that happens.  Imagine what the financial landscape will look like when stocks, real estate and other major transactions are settled and extinguished primarily using commodity currencies.

Platinum looks like a terrific deal if only because there is so many illusions and it is the hardest and rarest of the precious metals.  Why not move at least 1-5% or more of one's cash balances into this alternate currency? Platinum can never become worthless.  I think being able to purchase this rare precious metal without obdurate coin or bar premiums has resulted in myself being bit by the platinum bug.

Disclosure:  Long physical gold, silver and platinum with no interest the problematic GLD or SLV ETFs, the Swiss platinum ETF or in the Angloplat, Impala Platinum (IMPJ.J), Lonmin and Norilsk Nickel (GMKN.MM) or Stillwater Mining Company (SMC).