For once, the reason is clear: It's the recent troubles in the mining sector in South Africa. The violence has triggered a lot of uncertainty about the future of the platinum miners, and a considerable reduction of the supply of the precious metal is expected if the conflict continues or escalates.
In addition, the recent German legal approval of the measures taken to help solve the European crisis has been well received by the markets, and gives some hope that the demand of platinum for use in catalytic converters in cars may increase as European consumers buy more new cars.

It is, as always, hard to predict the future of the price of platinum, but the recent hike is a reminder of just how vital South Africa is to the supply side. And it seems likely that some unrest among miners will continue for the foreseeable future, which is good news for those who bought a platinum ETF this summer.

The reason appears to be a falling demand for platinum jewelry in the Asian consumer markets along with the continuing financial troubles globally, not least in Europe. That means that platinum for use in catalytic converters is also moving slow.

In addition, we have the continuous problem of the platinum stockpile sloshing around in the global markets, acting as an effective buffer against any upward movement.

It's illustrative for the platinum price that gold now has a 16 percent premium on it - that hasn't happened since 1987. As we know, gold trading at a higher price than platinum is rare and indicates a weak economy. Normally, platinum costs more per ounce than gold does.

The price of platinum has been weak this year, dipping below $1400 several times.

How does it look going forward? Auto sales are projected to remain low for months yet, especially in Europe, where there's no end in sight for the crisis. When Asians will pick up their interest in platinum jewelry is anyone's guess.

So, it's not looking good for this year. It seems the best we can hope for is that the price will stop falling, stabilize over a month or so and then slowly pick up. At some point, there has to be a balance between supply and demand, and the low price we're seeing is unsustainable to many platinum miners. No new investments means that when the price starts to rise, it may go up fast. This could be a good time to get in.

But that's an optimistic projection. If the price of platinum keeps falling, it's not out of the question that we'll see it in three figures before the year is out. A dabble in an inverse ETF may start to look interesting...

A clear downtrend is developed for the platinum price.

It seems financial instability, in Europe particularly, and surplus metal in the global markets is to blame for many analysts cutting their forecasts for the average price of platinum this year. An average only a little over $1600 an ounce was not what we had in mind at the beginning of the year.

European car manufacturers are still subdued because of the ongoing Euro crisis, and demand less platinum then they otherwise would. It's anyone's guess when that situation may show improvement.

On the other hand, there's demand for platinum from investors, as the interest for investing in precious metals remains high. Gold is popular, as always, but some of the enthusiasm is expected to spill over into platinum as well.

In 2011, there was a global production surplus of platinum of about 12 percent, which is also due to a supply increase of five percent. Even so, the average price for the year was an all-time high. There's expected to be a slightly larger surplus in the platinum production this year.

We should not expect the price of platinum to bounce back anytime soon, as there seems to be a stockpile of the metal sloshing around in the global markets. During the past few years, a surplus of more than 4 million ounces has accumulated in the market, considerably dampening the price so far this year. The situation is expected to continue for at least a couple of years. The proper response to this is a reduction on production, but it seems one is unlikely to follow for a while.

For comparison, if production of platinum were to halt entirely, this stockpile would cover the global demand for almost a year.

The stockpile and recycled platinum will act as a buffer against an increase in the price, even though the political unrest in southern Africa is threatening the supply side.
We should be prepared for the platinum price development to remain moderate for the next two or three years.

After that, it seems we might be in for a nice development, as the stockpile gradually decreases and production slows. The mining companies have no intention of investing in higher production with prices as low as around $1600 an ounce, and that may help the price increase sharply a few years from now.

It seems that for the time being, investing in a platinum ETF is only for the long term - or for the adventurous.

As we noted before, the head and shoulder formation at around $1550 had to be broken on high volume for the upwards trend to be established. That happened around January 25th, when we see a classic testing of the resistance at $1550, a tiny dip and a strong increase to over $1600. The trend is looking very strong now.

The trend is up for the platinum price.

The next resistance is around $1650, and may take a little more to break through than this lighter resistance that was just thrown aside. If that succeeds, there's no great resistance under $1900. So there's a lot of profit to be gotten from a platinum ETF before we approach those levels.

And after that? With the supply side weak and the demand growing, we would not be surprised to see an all-time high before 2012 is out. The current trend certainly seems to indicate the possibility.

Update May 2012: But the situation a few months later is less rosy. Click here to see the details.

PLTM is an ETF, and owns commom stock in platinum group metals public companies.
It tracks the ISE Global Platinum Index, and the assets consist of about 90% common stocks of the companies that the index is based on. This gives investors the possibility to invest in the companies that are involved in platinum group metals. It is thus not a pure platinum ETF, but also concerns palladium, osmium, iridium, ruthenium and rhodium. This is a non-diversified fund.

The chart of PLTM from early 2011 to January 2012.

PLTM has assets worth just over $7 million, and is invested in, among others: Johnson Matthey, Anglo American Platinum, Impala Platinum Holdings, African Rainbow Minerals, Lonmin and Norilsk.

The fund's inception date is March 11th, 2010.

Daily volume is around 9000, which means that the liquidity is low.

PLTM provides a way of investing in the platinum group metals via an ETF.

Platinum-ETF.net comment: PLTM is a convenient way of tracking the whole platinum group sector. Note that this may be quite different from investing in the platinum price through a platinum ETF, as there is no set correlation between the platinum price and the performance of these companies. In 2008, for instance, the mining companies worldwide plummeted in price more than the price of platinum.
Liquidity is low.
The annual expense ratio of 0.70% seems appropriate in comparison with other ETFs.
Platinum-ETF.net grade: C+

PTD is a platinum ETN (exchange-traded note), which means that it behaves much like an ETF, but is technically a debt note and not a fund.

The daily chart for PTD from early 2011 to January 2012.

PTD is not backed by physical platinum, and has a value of around $3.4 million (December 2011). It tracks the platinum price and the inverse performance of the UBS Bloomberg CMCI Platinum Excess Return index by being exposed to platinum futures and is intended to reflect the inverse returns of the futures contracts on platinum. The annual fee is 0.65%.

PTD was launched in May of 2008.

Like all inverse platinum ETFs and ETNs, PTD is designed for those who wish to short sell platinum without having to hold the physical metal.

While ETFs have tracking risk, ETNs like PTD have credit risk. There is a possibility, although unlikely, that the issuing bank (UBS in the case of PTD) may go bankrupt and take some of the value of the ETN with it. This credit risk should be balanced against the tracking risk of ETFs, which means that the valuation of the ETF may be slightly different than the underlying index. The credit risk of ETNs is no different from the credit risk that is associated with most other investment products and derivatives.

Depending on local tax legislation, an ETN may be more tax efficient than an ETF.

Liquidity of PTD is low, with daily volume around 700.
The security can be traded throughout the day like a stock, and it is also possible to sell it short.
The lack of diversification that is a part of any single commodity-tracking ETF or ETN means that concentration risk is 100% for PTD.

Platinum-ETF.net comment: This platinum ETN is not backed by physical platinum, but tracks the inverse of the platinum price (technically, the UBS Bloomberg CMCI Platinum Excess Return) by being involved in the market of platinum futures. For the layman investor, this process is considerably more difficult to comprehend than a physically backed ETF. The credit risk associated with this structure (ETN) can be an issue for very conservative investors. The expense ratio of 0.65 appears reasonable, compared to other ETNs. The low liquidity may be a drawback for some investors. US investors may enjoy tax advantages from an ETN relative to an ETF.
PTD is traded on NYSE Arca in the US.
Platinum-ETF.net grade: C+

2011 was a special year with several new platinum ETFs being launched, even though the price of platinum took a plunge, and dived below the price of gold.

It is now easier than ever to invest in platinum by buying a platinum ETF, or to bet against the platinum price by buying an inverse ETN or even one that is leveraged. The future development of the platinum price is thus of great interest.

The platinum price is very volatile, mainly due to the fact that the metal has many industrial applications. While precious metals such as gold tend to increase in price during economical downturns, the platinum price tends to fall with the stock markets, and buying platinum is thus not a way to hedge against recession.

The gold/platinum ratio.

Even so, due to the scarcity of the metal, platinum is usually valued higher than gold. It's very rare that the ratio of platinum vs gold falls below 1, but that has been the case for months as of this writing (January 2012). Certainly the gold price has shot up to very high levels, but the discrepancy is too great to account for by assuming that gold is overvalued. Most precious metal analysts agree that platinum is undervalued – in other words, cheap. It is currently valued just a little over its price of production, while gold is valued at 6 times its cost of production. We can expect to see a surge in the platinum price in 2012.

The platinum price factors

One major driving factor for the platinum price in 2012 will be the auto industry. US automakers are seeing greater demand than they have since 2007, and sales figures are up. This recovery is expected to continue in 2012.

The Russian Norilsk group, a major manufacturer of platinum, predicts a 5% increase in demand for this year. That is more than other industrial metals are expected to increase. Some analysts estimate that automakers will use around $7 billion on platinum for catalytic converters this year, which will be the most since 2007.

The growing demand for fuel cell technology will also contribute to higher prices for platinum and palladium.

Other industrial applications, such as electronics, are also predicted to increase demand for platinum in 2012.

Rising demand for platinum jewelry, especially in China, will likely also account for a surge in the platinum price. Analysts estimate that the sales of platinum jewelry will rise by 40% this year.

Platinum ETFs also stockpile platinum, and held 7% more of the metal at the end of 2011 than at the beginning of the same year.

At the same time, the supply of platinum is constrained. Platinum miners see no increase in production capacity until 2020 at the earliest. Producers are even warning that output may fall, due to looming strikes in South Africa and other troubles in Russia.

On the other hand, economic recovery in the Western economies has been sluggish, and as more cars are scrapped, access to recycled platinum will increase. At the same time, due to the low supply, manufacturers of cars are increasingly using palladium instead of platinum in catalytic converters.

According to Yahoo! Finance, platinum and palladium “could be the best portfolio bet in 2012”. Buying a platinum ETF is the easiest way to profit from a little dabble in the precious metal.

Update, May 2012: Or not...

Technical analysis: The platinum price developed a pronounced head and shoulder pattern toward the end of 2011. This set a strong resistance around $1550 per ounce of platinum. The price must likely break through that resistance with high volume if any substantial increase in price is going to last.

Technical chart of the platinum price.

IPLT is an ETN (exchange-traded note), which means that it behaves like an ETF, but is technically a debt note and not a fund.

This platinum ETF is inversely leveraged by a factor of 2, meaning that the fluctuations are twice the magnitude and opposite of the index it tracks (S&P GSCI Platinum Index ER).

A chart for IPLT since its inception in 2011.

IPLT is not backed by physical platinum, but tracks a platinum price index by being exposed to platinum futures and is intended to reflect the returns that are potentially available through an inverted, leveraged investment in the futures contracts on platinum. While that process shouldn't require much active management, the expense ratio of 1.35% appears high. This is the only leveraged short platinum ETF/ETN currently available.
PTM was launched in October of 2011, and is issued by VelocityShares. It tracks the S&P GSCI Platinum Index ER.

IPLT is designed for those who wish to short platinum. There are no tracking errors with ETNs, as opposed to ETFs, which can sometimes stray a little from the index or commodity price. This security is intended for sophisticated investors.

While ETFs have tracking risk, ETNs like IPLT have credit risk. There is a possibility, although unlikely, that the issuer bank (Credit Suisse in the case of IPLT) may go bankrupt and take some of the value of the ETN with it. This credit risk should be balanced against the tracking risk of ETFs, which means that the valuation of the ETF may be slightly different than the underlying index. The credit risk of ETNs is no different from the credit risk that is associated with most other investment products and derivatives.

Depending on local tax legislation, an ETN may be more tax efficient than an ETF.

Liquidity of IPLT is low, with daily volume around 2,000.
The security can be traded throughout the day like a stock.
The lack of diversification that is a part of any single commodity-tracking ETF or ETN means that concentration risk is 100% for IPLT. In other words, the investor should be willing to lose 100% of his investment.

It is in the nature of selling short, especially with leverage, that any losses can quickly reach high levels. This platinum ETF should only be bought by sophisticated investors.

Platinum-ETF.net comment: This platinum ETF is leveraged 2x and inverse. It increases in value if the platinum index (the S&P GSCI Platinum Index ER) decreases, and the magnitude is double. It tracks the index by being involved in the market of platinum futures. For the layman investor, this process is considerably more difficult to comprehend than a physically backed ETF. The credit risk associated with this structure (ETN) can be an issue for very conservative investors. The expense ratio of 1.35% appears relatively high, but this is a unique platinum ETF in that it is the only 2x leveraged inverse platinum ETF currently available. The double leverage doubles the potential profit from a decrease in the platinum price, and the risk is correspondingly high. The low liquidity may be a drawback for some investors. US investors may enjoy tax advantages from an ETN relative to an ETF.
IPLT is traded on NYSE Arca in the US.
Platinum-ETF.net grade: B-

Net Asset Value (January 2012): $2.88 million

LPLT is an ETN (exchange-traded note), which means that it behaves like an ETF, but is technically a debt note and not a fund.

This platinum ETF is leveraged by a factor of 2, meaning that the fluctuations are twice the magnitude of the index it tracks.

A chart for LPLT since the inception i 2011.

LPLT is not backed by physical platinum, and has a value of around $2.8 million (December 2011). It tracks a platinum price index by being exposed to platinum futures and is intended to reflect the returns that are potentially available through a leveraged investment in the futures contracts on platinum. While that process shouldn't require much active management, the expense ratio of 1.35% appears high. This is the only leveraged long platinum ETF/ETN currently available.
PTM was launched in October of 2011, and is issued by VelocityShares. It tracks the S&P GSCI Platinum Index ER.

Like all platinum ETFs and ETNs, LPLT is designed for those who wish to invest in platinum without having to hold the physical metal. There are no tracking errors with ETNs, as opposed to ETFs, which can sometimes stray a little from the index or commodity price.

While ETFs have tracking risk, ETNs like LPLT have credit risk. There is a possibility, although unlikely, that the issuer bank (Credit Suisse in the case of LPLT) may go bankrupt and take some of the value of the ETN with it. This credit risk should be balanced against the tracking risk of ETFs, which means that the valuation of the ETF may be slightly different than the underlying index. The credit risk of ETNs is no different from the credit risk that is associated with most other investment products and derivatives.

Depending on local tax legislation, an ETN may be more tax efficient than an ETF.

Liquidity of LPLT is low to moderate, with daily volume around 4,000.
The security can be traded throughout the day like a stock, and it is also possible to sell it short.
The lack of diversification that is a part of any single commodity-tracking ETF or ETN means that concentration risk is 100% for LPLT.

Platinum-ETF.net comment: This platinum ETF is not backed by physical platinum, but tracks the platinum price (technically, the S&P GSCI Platinum Index ER) by being involved in the market of platinum futures. For the layman investor, this process is considerably more difficult to comprehend than a physically backed ETF. This product tracks its underlying index without error. Tracking risk is thus zero. The credit risk associated with this structure (ETN) can be an issue for very conservative investors. The expense ratio of 1.35% appears relatively high, but this is a unique platinum ETF in that it is the only long leveraged platinum ETF currently available. The double leverage doubles the potential profit from an increase in the platinum price, and the risk is correspondingly high. The low liquidity may be a drawback for some investors. US investors may enjoy tax advantages from an ETN relative to an ETF.
LPLT is traded on NYSE Arca in the US.
Platinum-ETF.net grade: B-

Net Asset Value (January 2012): $30 million

Like PTM, PGM is an ETN (exchange-traded note), which means that it behaves like an ETF, but is technically a debt note and not a fund.

The daily chart for PGM from early 2011 to January 2012

PGM is not backed by physical platinum, and has a value of around $30 million (December 2011). It tracks a platinum price index by being exposed to platinum futures and is intended to reflect the returns that are potentially available through an unleveraged investment in the futures contracts on platinum. While that process shouldn't require much active management, the expense ratio of 0.75% is higher than the physically-backed platinum ETF PPLT (0.60%) and the platinum ETN PTM (0.65%), which is similar to PGM is most respects.

PTM was launched in June of 2008, and is a product of iPath, a brand of Barclays Bank. It tracks the Dow Jones-UBS Commodity Index Total Return.

Like all platinum ETFs and ETNs, PTM is designed for those who wish to invest in platinum without having to hold the physical metal. There are no tracking errors with ETNs, as opposed to ETFs, which can sometimes stray a little from the index or commodity price.

While ETFs have tracking risk, ETNs like PGM have credit risk. There is a possibility, although unlikely, that the issuing bank (Barclays Bank in the case of PGM) may go bankrupt and take some of the value of the ETN with it. This credit risk should be balanced against the tracking risk of ETFs, which means that the valuation of the ETF may be slightly different than the underlying index. The credit risk of ETNs is no different from the credit risk that is associated with most other investment products and derivatives.

Depending on local tax legislation, an ETN may be more tax efficient than an ETF.

Liquidity of PGM is low to moderate, with daily volume around 4,000.
The security can be traded throughout the day like a stock, and it is also possible to sell it short.
The lack of diversification that is a part of any single commodity-tracking ETF or ETN means that concentration risk is 100% for PGM.

Platinum-ETF.net comment: This platinum ETF is not backed by physical platinum, but tracks the platinum price (technically, the Dow Jones-UBS Commodity Index Total Return SM) by being involved in the market of platinum futures. For the layman investor, this process is considerably more difficult to comprehend than a physically backed ETF. This product tracks its underlying index without error. Tracking risk is thus zero. The credit risk associated with this structure (ETN) can be an issue for very conservative investors. The expense ratio of 0.75 appears relatively high, especially as compared to the very similar platinum ETF PTM. The low liquidity may be a drawback for some investors. US investors may enjoy tax advantages from an ETN relative to an ETF.
PGM is traded on NYSE Arca in the US.
Platinum-ETF.net grade: B-