Go Platinum (PGM)

With the dollar plunging and the prospect of inflation in the next few years, investors are looking more closely at precious metals. Today we’ll take a look at the third precious metal: not gold, not silver, but platinum.

This “white gold” is 16 times more rare than gold (30X by some estimates). It’s 100 times more rare than silver – and unlike silver, platinum is resistant to tarnishing. Investing in platinum used to be very difficult.  Now however, with futures contracts, you can buy platinum on the NYMEX. Even better, with ETNs, you can buy platinum without calling a pushy precious metals dealer.

Why would we consider something an infomercial might hawk on early morning television? Doesn’t platinum belong to the hard-money crowd? Platinum may be more familiar to precious metals investors, but it’s not just for gold bugs anymore. In fact, platinum may be an even better opportunity than gold. Gold may be going to the moon, but we think platinum is shooting for Mars.

Why should you consider buying Platinum? For one, the price of platinum recently shot up past gold once again. The price usually resides in this area, but in the 2^nd half of 2008 platinum crashed from overbought conditions. Auto manufacturers – who use a lot of platinum in certain components – dumped the metal while trying to raise cash last year. While demand dropped for automakers, demand recently skyrocketed in Asia. This caused an ounce of platinum to break decisively above the all-important $1000 level once again.

Second, Bush/Obama inflation is almost here. As the dollar continues to be devalued by the Federal Reserve, investors are fleeing to hard assets like commodities and precious metals. Cash may be king, but many investors are waking up to see the dollar emperor has no clothes. When the United States Treasury Secretary becomes “quite open” to a new global currency, you know it’s time to look for non-dollar alternatives.

One of the easiest ways to invest in platinum is through Barclay’s iPath Dow Jones-AIG Platinum Total Return Sub-Index ETN (PGM). This exchange traded product seeks to mirror the unleveraged investment of platinum futures prices per the Dow Jones-AIG Platinum Total Return Sub-Index. (In case you’re worried, this investment is not associated with AIG; they just developed the index.)

Looking at a chart of platinum, it has been on a tear in recent months. Dipping below $500 last October, platinum has surged above $1200 on economic uncertainty and it appears to be holding that level. This gives you a nice entry opportunity.

PGM does a good job mirroring the platinum price in relative performance. We think it’s a good time to invest in platinum before it jumps again. Make sure you buy with a limit price to ensure a good fill. To grab your piece of the exploding precious metals play, go with PGM.