Forget Gold, Buy Platinum!

| August 11, 2011 | 0 Comments

platinumAnother day, another wild swing in the stock market.  600 points down… 400 points up… 400 points back down… whew!  What a crazy time to be a stock investor.

And this week’s wild ride isn’t exactly endearing investors to stocks.  In fact, gold is skyrocketing to record highs as money floods into the safest of safe haven investments.

As of this writing, gold has reached a record high of over $1,800 per ounce.

Think about that… just ten years ago gold was trading for under $300 an ounce.  Clearly, it’s been a tumultuous decade for investors.

By now, it’s apparent that gold has become the go to investment for risk averse investors across the globe.  Gold serves as an inflation hedge, a deflation hedge, and a hedge against political and economic uncertainty.  Basically, it’s a catch-all, anti-risk investment.

But has it gone too far?

Look at it this way… physical gold has few inherent benefits.  It doesn’t pay interest or dividends.  It doesn’t grow profits or cash flow.  The precious metal doesn’t even have many industrial uses.

Okay – I realize investors love precious metals in times of financial volatility and economic uncertainty.  And that’s been the case throughout history.

But why gold?  Why not some other precious metal… like platinum.

Just like gold, platinum is a rare precious metal often used in jewelry.  But unlike gold, platinum has legitimate industrial value, namely in the automotive industry.  Platinum is a key component in most automobile engines.

But isn’t the automotive industry going to be in trouble with a potentially looming recession?  Maybe.  However, plenty of cars are still going to be built in the coming months – especially in places like China.  And tons of platinum is going to be needed.

Moreover, platinum is a rarer metal than gold.  Fundamentally, platinum should be worth more.  In fact, over the last decade, platinum prices on average were roughly twice as high as gold.

But here’s the crazy thing…

Currently, gold is trading at a higher price than platinum.

And it’s simply a relationship that can’t hold in the long-term.  Between demand for platinum in the automotive industry and overall rarity of the metal, it just doesn’t make sense for gold to ever be priced higher than platinum.

One way to take advantage of this disparity is through penny stocks.

Small, penny stock mining companies are in abundance, with more popping up each day.  Most of these are gold and silver miners.  However, a handful of these companies focus on metals like platinum and palladium.

Instead of buying gold miners, take a look at penny stocks that mine for platinum.  Gold may be a safe investment, but at current prices platinum offers better upside.

Precious metals are a good addition to your portfolio in tumultuous periods… just make sure you’re buying the right one.

Yours in profit,

Gordon Lewis

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Category: Commodity Stocks, Gold Stocks, Penny Stocks to Buy

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