^{How Rare is Platinum?}

One of the many attractions of platinum is its scarcity. The extremes to which man must go to extract this metal from the earth range from delving beneath the frozen wilderness of Siberia, to plumbing the heated depths of the Merensky Reef. Gold and silver, long prized for their beauty and scarcity, are relatively abundant when compared to the small quantities of platinum available for man’s exploitation.

There are several measures by which to measure platinum’s scarcity: the quantity produced annually, the quantity mined throughout history, the quantity in above-ground stocks, and the availability of platinum reserves for potential mining in the future.

Annual Production

Estimates are that in recent years annual production of silver is over 115 times as much as what is annually produced for platinum. Estimates are that over 15 times as much gold is produced as is platinum. ¹

In 1997, the price of silver averaged $4.90 per troy ounce, the gold price averaged $333 per troy ounce, and the platinum price averaged $394 per troy ounce. For 1997, the price ratio of platinum to silver was roughly 80 to 1. The price ratio of platinum to gold was roughly 1.2 to 1. The implication is that when compared to the other metals the amount of platinum produced is miniscule, while the price of the metal is not so expensive as this disparity might imply.

Total Historical  Production of Platinum

Estimates are that less than 200 million ounces of platinum have ever been produced.2 The vast majority of platinum has been fabricated and is not readily available for reuse. Unlike gold, where the majority of above-ground stocks can be easily brought back onto the market for melting and fabrication, most above-ground platinum is in forms less likely to come back onto the market unless the price for platinum increases significantly.

Available Above - Ground Supplies
The US Defense Logistics Agency (DLA) holdings of platinum are 453,326 ounces as of September 1996. This quantity is being drawn down at a rate of 10,000 ounces a year, providing approximately 1/500th of world annual platinum supply.3

Outside of the DLA, there are no other known stockpiles of platinum of comparable size. Modest inventories of platinum are held by the main commodity exchanges where platinum is traded in Tokyo, London, Zurich, and New York. Various industrial consumers may hold small amounts of inventory as well. However these inventories have been largely drawn down over the past 18 months. Current levels total less than 1/50th of world annual platinum supply. Russia is believed to held some platinum reserves; their holdings are a state secret and most analysts believe that these inventories are significantly reduced from the early 1990s.

CPM Group estimates that investors hold about 2 million ounces of platinum. The amount held in bullion coin form has not displayed a tendency to come back onto the market to meet industrial supply demands. This implies that the coin bullion sector is characterized by long-term investors who are not generally sensitive to short-term price swings.

The overall scarcity of platinum and the supply deficit for both 1997 and 1998 (projected) have put significant upward pressure on the platinum markets. Increasing platinum production levels in some regions have helped to keep key industrial consumers supplied, yet overall production growth is small. Increasing production rates take significant time and capital. Much of the platinum produced outside of South Africa is mined as a byproduct of nickel. These supplies are not as flexible in meeting market needs as are other metals.

1 CPM Group
2Compiled from National Geographic, USGS, and CPM Group figures.
3 Source: USGS

Platinum Guild International makes no representation or recommendation as to the advisability of investing in platinum or other precious metals and is in no way responsible for any representations made by others. You should consult with your investment advisor before making any investment. Prices were obtained from sources the PGI (USA) believes to be reliable. PGI (USA) shall be held harmless for any inaccuracies.