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.

Clear the Decks: Gold Is Coming Down!

So is it fun enough for you yet? Does the fall out from the mortgage meltdown that led to the world markets instability and stocks tumbling finally seem to hit home? It’s been a rough time in the markets lately, and while many people have found sanctuary in precious metals, even that stability may be ripped out from under investors this week. Commodities, led by gold and base metals, are set for one of their biggest weekly declines in decades and why? Because fears of global recession have widened and in spite of U.S. and European government’s bailout efforts, it’s not going to be pretty. The surge in the dollar against the euro and the pound put added pressure on investors to liquidate their positions.

Gold has always been the darling of many for its appeal as a safe-haven investment but now is headed for what many predict will be its steepest weekly decline in more than a quarter-century. In London, the issue is said to be the rising dollar and plunging equities which are curbing investor demand for the precious metal. Gold fell as much as 13% this week, the biggest drop since the week ended March 14, 1980. The FTSE 100 Index sank 9.1% in London this past week while the pound slid the most versus the dollar since 1971 after the UK economy shrank for the first time since 1992.

These are not good signs for investors, but what about that vaunted stability in gold?

At the close of the markets on October 24, 2008; gold for immediate delivery fell as much as $39.04, or 5.4%, to $682.41 an ounce, the lowest in over a year compared with intra-day prices. Gold futures for December dropped $18.70, or 2.6%, to $696 in electronic trading on the Comex division of the New York Mercantile Exchange.

And while gold has fallen, so has platinum. This metal declined $32.15, or 4%, to $778.35 an ounce, more than a four-year low. It’s futures in Tokyo fell 16% last week amid mounting concern that plunging auto sales would cut use of catalytic converters. Among other metals, silver for immediate delivery dropped as much as 99.75 cents, or 10%, to $8.6825 an ounce, the lowest since December 2005.

These are frightening times. Gold isn’t the safe haven that it was in the past, but at the end of the day, it can still be considered safer than many stocks. We have trying weeks and months ahead. And in the face of what’s expected ahead, gold and precious metals will be an interesting segment of the market, if you’ll watch it with me.