A Commodity under the Radar

Gold is within a mere 7% of a new 26-year high. The culprit: the U.S. dollar is heading south. That in turn causes inflation to rev higher, & other natural resources to climb virtually non-stop. I have no doubt that market will soon see record new highs in gold and oil. The black gold is also a mere $12 or so away from a record high. But I want to talk about another natural resource: A forgotten metal that is well on its way to new all-time record highs: Platinum.

Platinum is among the world's rarest metals. New mine production totals about five million troy ounces a year. Compare that to gold, where mines produce approximately 82 million ounces a year. 76% comes from South Africa; 14% from Russia & North America contributes about 6%. The rest of the world makes up the other 4%. In terms of total platinum reserves in the ground, it's estimated that there are only about 3.5 billion ounces left.

Meanwhile, above-ground platinum reserves have been practically wiped out! That's because demand for platinum has been soaring. Back in 1975, demand was about 2.6 million ounces a year. Today, it's virtually tripled to seven million ounces. In the last 10 years, demand has exceeded mine supply by nearly 8.3 million ounces.

About half of all platinum goes to the automobile industry for use in catalytic converters, which reduce the toxicity of emissions from engines. Never mind that the U.S. auto industry is suffering from miserably slow sales or that energy prices are rising around the world. The fact is that cars are now becoming affordable for hundreds of millions of people in: China! The country's auto production soared in Q1 of this year. There were 2.19 million vehicles produced in Q1, up 22.6% from the same period last year. In March alone, China puts nearly 854,000 new cars on the street. And for all of 2006, China put out 7.22 million autos! The country needed 58% more platinum for catalytic converters in 2006 than it did in 2005!

And, by 2010, China will overtake Japan as Asia's largest carmaker, producing an estimated 11 million vehicles per year. What do you think will happen to the price of platinum by then? And don't forget, China is just one of the emerging giants: South Korea and Thailand are each producing more than a million vehicles per year. India is putting out about a million vehicles a month, pushing up demand for platinum even more. So is Brazil, which saw production jumped 7.4% in March.

This natural built-in and growing demand for platinum — in the face of severely limited supplies — is a major reason why platinum prices are exploding higher. And in my opinion, the price of platinum could double over the next couple of years from a current $1,300-an-ounce level to $2,500 an ounce.

Also, new clean air legislation in the U.S. and in many of the world's fastest-growing economies will keep sending demand for platinum through the roof. The global warming issue, and attempts by authorities around the world to cut down on pollution, will have a major effect on the way cars are produced. The new & more stringent environmental regulations involve a greater number of countries than ever before. Countries that a decade ago had little or no environmental regulation will soon have restrictions on auto emissions.

Everything I have been warning you about is coming to pass. The dollar is ill; inflation is soaring and natural resource prices are climbing skyward. Be prepared for profit or be prepared to watch others take profit. And don't say I never say, for I have said it here already. Your call.