HH The One Precious Metal You Shouldn’t Buy

A lot of readers have been asking me lately whether they should invest in platinum. After all, platinum is a precious metal like gold, right?

In fact, it’s often referred to as “rich man’s gold,” just like silver is “poor man’s gold.”

This terminology is misleading. There’s only one kind of gold: gold.

The case for investing in gold is completely different than the case for investing in platinum. Gold is best thought of as a currency, not a metal or a commodity (though it is also a metal or a commodity). The price of gold is driven by the type of macroeconomic factors that move currencies. And it serves as a safe haven against inflation and deflation, which of course makes it my preferred “insurance” for the Super Crash.

Platinum is a completely different story.

The price of platinum is primarily driven by its use as an industrial metal – and it’s so volatile that it’s a terrible long play.

In fact, I strongly suggest that you short it.

Here are my recommendations…

Don’t Be Fooled by Platinum’s Recent Rally

Platinum prices are largely driven by the auto industry, where platinum is a key component in catalytic converters. In recent years, American and Japanese manufacturers started shifting away from platinum to recycled catalytic converters or less expensive palladium. This reduced demand for platinum. Volkswagen’s emissions scandal also reduced demand for platinum.

As a result, demand for platinum is down sharply. Anglo American Platinum, a major producer, recently announced that it was placing all expansion projects on hold.

There are potential bright spots on the horizon, but they are far in the distance. The current market for fuel cells, which use platinum, is around 15,000 to 20,000 ounces of platinum per year. The potential demand could increase to 50,000 ounces per year if the auto industry adopts platinum fuel cell technology.