Platinum: Softening Gold’s Drop?

As usual just lately, it’s a rough turn into the week for gold prices.  Gold prices fell the most in six weeks as the dollar’s climb and slumping energy costs reduced demand for the precious metal as a hedge against inflation. Silver also declined.

So I thought we’d take a look at platinum prices.  South African investment bank and asset manager Investec is now cuttingt its 2009 and 2010 price forecasts for platinum, palladium and rhodium, citing a downturn in demand from industrial users such as carmakers.

“The platinum price has rallied in the last few weeks, but a weak rhodium price and strengthening rand mean the platinum group metal basket price remains low and a number of mines are still losing money,” said Investec analyst Rebecca O’Dwyer in a research note.

Platinum and Gold: When Metals Collide

Although platinum is 30 times rarer than gold, the two metals’ prices collided throughout the day and finally closed with gold at $822 per ounce and platinum at $823! Today’s $1 spread was nothing short of historical for precious metals; the last time platinum and gold met at such close quarters  was 1996!

Platinum has plummeted 65% for the year; gold has dropped 21%–making platinum next year’s bargain.

Metals had already seen a decline due to decreased consumer demand as a result of the economic downturn.  Adding to the ailment, platinum prices dropped further after the U.S. senate rejected a “bail out” for automakers today–deepening platinum’s fall from grace because of decreased demand for platinum in automobiles who use platinum for catalytic converters.

(Bloomberg) — According to London based metals refiner, John Matthey Plc, automakers make up about half of the world’s platinum and palladium demand. In 2006, North American automakers used 905,000 ounces of platinum.

According to Derek Engelbrecht of Impala Platinum Holdings, “the agony will continue in 2010″, if platinum miners in South Africa, who account for almost 80% of the world’s platinum supply, do not cut production. Without it platinum will, at best, stay at equilibrium or continue to decline.

2009-2010 will be the year of platinum jewelry as a direct result of decreased platinum jewelry prices. Perhaps now is the time to trade in your gold coins and buy that high-end platinum and 18k gold wedding band!

Platinum Prices Tied to the Big 3 Automakers?

Platinum fell below $800 an ounce on Thursday–a welcome sight for most in the fine jewelry industry, who consequently are able to lower platinum jewelry prices in hopes of motivating consumers to purchase such items as platinum wedding bands.

Platinum has exhibited nothing short of a bona fide crash in 2008, with platinum precious metal prices down 65% since its monumental peak of approx. $2,300 in March 2008. Platinum, today, hovers near $795 per ounce.

As a second generation jeweler and CEO of Apples of Gold Jewelry, I have been trying to fathom the mechanics of platinum’s elephantine decline. To the evident chagrin of precious metals investors, I have been outwardly gleeful to be able for the first time in six months to actually lower prices on jewelry, rather than raise them. Our goal, after all, at Apples of Gold, is to adhere to our value-based pricing philosophy which has helped boost jewelry sales in past years.

One recent timely factor of platinum’s fall from primordial heights: worries that trouble for American automakers will cut demand for platinum which is used in catalytic converters (motor vehicle pollution control devices). The economy, as we know, is intricately weaved in all of its multi-chromatic facets. Platinum prices fell, however, much earlier than the CEOs of the “Big 3″ flew their G4 private jets to Washington in the most surreal moment of 2008.

The biggest factor: Crude oil prices, a commodity that is economically and intricately tied to precious metals. Oil prices have declined 70% for the year since oil’s otherworldly 52 week high of $145 per barrel.  Oil hit a 5 year low today, closing at $43.67 per barrel, a low not seen since 2003. It’s noteworthy that gas prices have not yet fallen 70% since–but they have made large strides in the right direction.

A marginally rising U.S. dollar and falling oil prices are major contributors to falling precious metals, including gold, platinum, and palladium. The U.S. dollar is up approx. 18% vs. the Euro this year–all of which is contributing to precious metals’ decline (historically precious metals are inversely tied to the U.S. dollar as a hedge against inflation and instability in world markets).

Another major factor for platinum’s fall-out and perhaps the one that makes the most sense? Q1-Q2 platinum prices were simply too inflated at $2,300 per ounce and could not sustain long term jewelry demand. Platinum was far too expensive and out of the reach of most consumers. Although still a “metal for the masses”, platinum has become more attainable.

Personally, I feel much more comfortable with platinum prices in the $700 range. The lower the cost of raw materials, the lower jewelers are able to market their finished, designer jewelry pieces. With the economy in an untenable ball of fear, lower prices are a refreshing and welcome sight in the jewelry industry.

Apples of Gold has recently lowered prices on all of its platinum jewelry. And we hope this trend will continue.

Platinum Wedding Band Prices Down Sharply

With platinum prices down significantly this year, it is the perfect time to buy that platinum wedding band you’ve been eyeing all year.

Apples of Gold Jewelry has lowered prices recently on all of its platinum rings, including their line of plain platinum wedding bands, design platinum wedding bands, and Celtic platinum wedding bands.

Many jewelers have been hesitant to lower platinum prices due to the unusual amount of volatility in the precious metals markets, especially for metals like platinum which are historically more volatile than metals such as gold.

Platinum reached its high in March 2008 when it peaked at approx. $2,300 per ounce. As we approach the end of the year and the upcoming holidays, platinum sits unnoticed at approx. $800 per ounce–a staggering loss in the platinum markets.

This does not mean that platinum prices are now 1/3 of the price, but reputable jewelers should now begin to lower their prices on platinum. Since platinum is a nearly pure metal with platinum jewelry mostly being 950 grade (95% pure platinum), it will always cost more than its gold counterpart (which is often 58% pure such as in 14k gold vs. platinum’s 95% purity). Other cost factors include higher manufacturing and labor costs for platinum jewelry, as well as lower demand compared to other precious metals such as gold.

Still, you should now begin to see platinum jewelry prices falling approx. 25% or more, if the jewelry industry takes note of a vastly changing market.

Platinum wedding bands, now slightly more affordable than before, remain an excellent choice for longevity, low maintenance, and for their hypoallergenic properties.

Visit Apples of Gold Jewelry to view their unique and affordable line of platinum wedding rings.

Platinum — The More Volatile Precious Metal

Gold and jewelry enthusiasts, even economists and investors, have been closely watching the unpredictable gold market in the past several years as it began to behave uncharacteristically erratic. But platinum, its more expensive counterpart, has been largely ignored.

Platinum has had some dramatic swings as of late – enough to make gold seem tame by comparison. Platinum, reaching a high of $2,300 an ounce in March 2008, today closed at $794.00 (October 24, 2008), losing more than 65% of its value in the space of only 7 months.

Have platinum jewelry prices followed? Not entirely. Jewelers are still hesitant about lowering platinum prices for several reasons:

• Unstable platinum prices means that platinum as a commodity could quickly increase again in price. Platinum markets sometimes see a 15-20% swing in a single day.

• Jewelers have a genuine need to make up for lost profits due to record prices in other precious metal categories, such as gold and the overall loss of sales, margins, and unprecedented challenges in the jewelry industry.

• A considerable increase in business expense and risk to jewelers over the past several years. Many manufacturers have simply closed their doors after decades of business.

Jewelers will have to see a sustained decrease in the price of platinum and other precious metals over the long term before safely lowering prices. In addition, for jewelers who stock inventory there is the added challenge of buying jewelry at the right moment—and the subsequent fear of losing the value of the jewelry if they buy high and prices fall shortly after.

Our stance at Apples of Gold Jewelry? We have tested the waters recently by lowering prices on all of our platinum wedding bands in order to meet changing market conditions. Or goal is to continue lowering prices if we see a steady decline in the platinum precious metals market.

The question now remains—where will the gold, platinum, and precious metals markets head tomorrow?