Six months ago platinum was hovering just below gold in value.  The time was right to buy then, just as right now, the time has once again come to jump on the platinum train and reap some rewards in this dismal economic environment.  Platinum today is at about $1200 per ounce, but many factors including mine closures and production declines.  The white metal is primed for a real recovery, years before an earnest economic recovery will occur anywhere in the world.

Platinum production in South Africa has slowed by almost 10% since the beginning of 2008.  Couple that with the fact that many Russian mines have closed or cut production by almost 25% in the past six months and there is a real recipe for this precious metal to climb beyond $2000 an ounce.  When production slows, even during times of low demand, an accordion effect of supply and demand gaps begins to occur in the short and especially mid term.  Russia has also talked recently about pulling the plug on some of its more lucrative mining contracts to help jack up the price of platinum.  Both Russia and China are seeing eye to eye right now and looking to leverage the rest of the world off of the US Dollar as a reserve currency and onto the SDR or other form of reserve.

Another factor that could lead platinum over the $2000 and ounce benchmark is the recent slowing and almost inevitable closures of factories belonging to US automakers.  If automobile production slows, as has been the case recently as no one is wanting new cars at the moment, platinum demand will also slow.  Many components are made with small but significant amounts of platinum and other parts use platinum when they are being produced.  Platinum is directly tied to industrial production, which has hit a lull recently worldwide.  So if demand right now is as low as it has been for years, and the metal is still trading at the $1200 mark, imagine where prices could go if industrial demand is increased, or should I say when it is ramped back up?

China, the world’s largest producer and consumer of industrialized goods and services is sitting on an economic powder keg.  It has called for other countries to dump the US Dollar as a reserve currency and has recently announced that it has begun to build its gold reserves up.  China will more than likely rebound even stronger after this world economic crisis is cleaned up, and platinum will be a major benefactor of this rebound.

Just as investors flocked to platinum when it briefly dipped below gold in November 2008, investors now will likely be flocking to the metal once again.  All of the conditions are present for this metal to blast through the $2000 an ounce mark.  Platinum will likely benefit from the increased economic instability that China is causing currently, and when the Chinese economy begins to recover, look for platinum to rise quickly.  Even if US automakers are saved and demand once again returns in the mid to long-term, platinum will most certainly benefit.