Let’s face the facts— The news has been notoriously wrong about a lot of things this year. From Brexit to this U.S election, the mainstream media can’t seem to get it right. If there is one thing we learned this year, it is that the market listens to no one.
For one, Brexit was completely unexpected. It was predicted by numerous news sources that if Brexit went through, it would be disastrous for the market. While it is true that there was a significant market reaction following the unforeseen decision, the market bounced right back to normalcy almost immediately.
The media also scared us all into thinking that world markets would throw a fit if Trump was elected, given his anti-politically correct guise. Yet, when Trump won, the market rallied in the following weeks to new all-time highs, adding over 2 trillion dollars in market capitalization, and the consumer confidence index reaching a 15-year high.
With major news sources, analysts, and polls being so wrong about Brexit and the US election, it’s fair to say that you can’t look to the news for major market change predictions. So, what can traders trust?
In times of uncertainty, it is best to look at the fundamentals of potential investments—rather than “buying the news”, buy into the facts instead. From looking at historical data, if there is one trade that has unbelievable potential in 2017, it is platinum.
Platinum, the metal often called “the rich man’s gold,” coined it’s name due to it’s rarity compared to Gold and Silver and it’s high industrial and automotive use. In fact, platinum is so rare that all the platinum ever mind could fit into your living room, according to the Outsider Club financial group.
Historically, platinum has held a premium to gold for nearly 90% of its industrial life. This premium has been recognized by society based on it’s rarity, being used in analogies such as “platinum records” or “platinum level” in a club membership.
In March of 2008, the price of platinum reached an all time high of $2,308.80. As the financial crisis unfolded, like other metals, platinum fell sharply to $761.80 by October of 2008. Then, the metal rebounded all the way back to $1918.50 in August 2011. Since then, platinum’s price has drifted down, ending 2016 at just above $900 after rallying to $1199.50 in August. At $900, the metal is currently cheaper than the cost to mine it.
With platinum in a five-year deficit, Trevor Raymond, the director of research for the World Platinum Council, says that 2017 could be the 6th year where demand is higher than supplies. While, platinum’s fundamentals have not been reflected in it’s price over the past year, Raymond believes that is due to investors favoring investments in silver and gold. Open interest for platinum has dropped from 81,600 contracts in August to fewer than 67,000 recently.
While open interest for the metal has waned over the past several months, Raymond says the fundamentals show demand picking back up in 2017. He explained that interest in platinum dropped off due to the perception of declining interest in diesel-powered automobiles. However, Raymond does not see platinum-based automobile catalysts demand changing from his analysis. Additionally, research using platinum in fuel cells could pave the way for an even higher demand for the metal in the coming years.
In an uncertain market, after a very unpredictable year, picking and choosing investments can be scary. Given the historic divergence between the fundamentals of platinum Vs. the supply/demand equation that dictates a much higher price, a small investment in platinum may yield healthy returns in the future.