Warning: Declaration of action_plugin_safefnrecode::register(Doku_Event_Handler &$controller) should be compatible with DokuWiki_Action_Plugin::register($controller) in /home/public/dw/lib/plugins/safefnrecode/action.php on line 14

Warning: Declaration of action_plugin_blog::register(&$contr) should be compatible with DokuWiki_Action_Plugin::register($controller) in /home/public/dw/lib/plugins/blog/action.php on line 0

Warning: Declaration of action_plugin_blockquote::register(&$controller) should be compatible with DokuWiki_Action_Plugin::register($controller) in /home/public/dw/lib/plugins/blockquote/action.php on line 0

Warning: Declaration of action_plugin_include::register(&$controller) should be compatible with DokuWiki_Action_Plugin::register($controller) in /home/public/dw/lib/plugins/include/action.php on line 0

Warning: Declaration of action_plugin_popularity::register(&$controller) should be compatible with DokuWiki_Action_Plugin::register($controller) in /home/public/dw/lib/plugins/popularity/action.php on line 0

Warning: Declaration of action_plugin_redirect::register(&$controller) should be compatible with DokuWiki_Action_Plugin::register($controller) in /home/public/dw/lib/plugins/redirect/action.php on line 0

Warning: Declaration of action_plugin_captcha::register(&$controller) should be compatible with DokuWiki_Action_Plugin::register($controller) in /home/public/dw/lib/plugins/captcha/action.php on line 0

Warning: preg_replace(): The /e modifier is no longer supported, use preg_replace_callback instead in /home/public/dw/inc/auth.php on line 656

Warning: preg_replace(): The /e modifier is no longer supported, use preg_replace_callback instead in /home/public/dw/inc/auth.php on line 656

Warning: preg_replace(): The /e modifier is no longer supported, use preg_replace_callback instead in /home/public/dw/inc/auth.php on line 656

Warning: preg_replace(): The /e modifier is no longer supported, use preg_replace_callback instead in /home/public/dw/inc/auth.php on line 656

Warning: preg_replace(): The /e modifier is no longer supported, use preg_replace_callback instead in /home/public/dw/inc/auth.php on line 656

Warning: preg_replace(): The /e modifier is no longer supported, use preg_replace_callback instead in /home/public/dw/inc/auth.php on line 656

Warning: preg_replace(): The /e modifier is no longer supported, use preg_replace_callback instead in /home/public/dw/inc/auth.php on line 656

Warning: preg_replace(): The /e modifier is no longer supported, use preg_replace_callback instead in /home/public/dw/inc/auth.php on line 656

Warning: preg_replace(): The /e modifier is no longer supported, use preg_replace_callback instead in /home/public/dw/inc/auth.php on line 656

Warning: preg_replace(): The /e modifier is no longer supported, use preg_replace_callback instead in /home/public/dw/inc/auth.php on line 656

Warning: preg_replace(): The /e modifier is no longer supported, use preg_replace_callback instead in /home/public/dw/inc/auth.php on line 656

Warning: preg_replace(): The /e modifier is no longer supported, use preg_replace_callback instead in /home/public/dw/inc/auth.php on line 656

Warning: preg_replace(): The /e modifier is no longer supported, use preg_replace_callback instead in /home/public/dw/inc/auth.php on line 656

Warning: preg_replace(): The /e modifier is no longer supported, use preg_replace_callback instead in /home/public/dw/inc/auth.php on line 656

Warning: preg_replace(): The /e modifier is no longer supported, use preg_replace_callback instead in /home/public/dw/inc/auth.php on line 656

Warning: preg_replace(): The /e modifier is no longer supported, use preg_replace_callback instead in /home/public/dw/inc/auth.php on line 656

Warning: preg_replace(): The /e modifier is no longer supported, use preg_replace_callback instead in /home/public/dw/inc/auth.php on line 656

Warning: preg_replace(): The /e modifier is no longer supported, use preg_replace_callback instead in /home/public/dw/inc/auth.php on line 656

Warning: preg_replace(): The /e modifier is no longer supported, use preg_replace_callback instead in /home/public/dw/inc/auth.php on line 656

Warning: preg_replace(): The /e modifier is no longer supported, use preg_replace_callback instead in /home/public/dw/inc/auth.php on line 656

Warning: preg_replace(): The /e modifier is no longer supported, use preg_replace_callback instead in /home/public/dw/inc/auth.php on line 656
Platinum and the rand [ClearOnMoney]
Top

Site

About
Contact

Warning: preg_replace(): The /e modifier is no longer supported, use preg_replace_callback instead in /home/public/dw/inc/auth.php on line 656
Sitemap

Profile

Warning: preg_replace(): The /e modifier is no longer supported, use preg_replace_callback instead in /home/public/dw/inc/auth.php on line 656
Trace:
Platinum and the rand

Reference

Main
Updates
Schedule

Warning: preg_replace(): The /e modifier is no longer supported, use preg_replace_callback instead in /home/public/dw/inc/auth.php on line 656

Warning: preg_replace(): The /e modifier is no longer supported, use preg_replace_callback instead in /home/public/dw/inc/auth.php on line 656
Commentary

Platinum and the rand

25 Jun 2013 by Jim Fickett.

Part of the recent fall in the price of platinum is due to a large change in the dollar-rand exchange rate. There are reasons to think this shift in the exchange rate is due mainly to the current rush out of emerging market assets, and is temporary. I remain of the opinion that platinum is cheap.

Platinum is currently at $1316/ounce. For most of the last four years it has ranged between about $1400 and $1800, so this is quite low.

Part of the low price comes with recent market volatility, particularly rising interest rates, which make gold and other precious metals less attractive to those who put heavy emphasis on carrying cost. A recent Wall Street Journal article, pointed out to me by Barry Hillman, notes that a part of the price drop is due to a fall of the South African rand against the US dollar. Since most platinum comes from South Africa, production costs in dollars have dropped considerably.

Platinum, which is a key component of car-exhaust systems and is also used in jewelry, has declined 14% in dollar terms this year to $1,329.10 a troy ounce on Monday, the lowest level since October 2009. Three-quarters of the world's platinum comes from South Africa. There, prices are up about 3% this year when converted into rand, the country's currency. …

“The biggest factor driving [supply] is the price of platinum in rand,” said Nicholas Johnson, a portfolio manager at Pacific Investment Management Co.'s $30 billion Commodity Real Return Strategy Fund. “The producers don't care about anything else.”

… The dollar has climbed 19% versus the rand this year. …

Macquarie estimates that the rand's drop has allowed miners to earn profits they would normally see when platinum trades at $1,700 an ounce, a 27% premium to today's prices.

So the key question is whether the dollar-rand exchange rate has adjusted for some fundamental reason, or whether the current low value of the rand is a temporary reflection of the current rush out of emerging market assets. Currency exchange rates are notoriously hard to predict, but I think there is some evidence for the latter.

One can a get a good long-term overview of the rand-dollar exchange rate by combining recent data from Bloomberg with a long-term chart (a few months out of date) from economist Brian Kantor, who follows South Africa. Kantor points out that the long-term trend line follows purchasing power parity, i.e. that exchange rate that allows you to buy more or less the same stuff in either currency, but that financial market swings often take the exchange rate far from this anchor. The current exchange rate (about 10 rand to the dollar) pretty closely matches two other historical peaks when volatility was high, and is far from purchasing power parity (about 7 rand to the dollar).

The bottom line is that the exchange rate is currently quite extreme and, although one never knows about such things, I think it is quite likely that the value of the dollar against the rand will fall again. If so then the previous analysis of production costs in dollars remains relevant (Platinum mining costs are likely to drive the long-term price moderately higher). I stand by my statement that platinum is currently cheap (All precious metals are down, but only one is obviously cheap).