Wednesday, February 29, 2012
It is a good idea to have emergency planning. For example, a plan to escape your house in case of fire. Insurance is planning and the spread of risk of potential disaster. With all of the uncertainty today, it is a good idea to have a supply of basic emergency items, even long term food storage. On the financial side, it is good to have some gold or precious metals. I have followed gold and precious metals since the late 1970’s. The inflation back then made it imperative to own some, of which I had none. I suspect we are due for another, even more severe round of inflation so to ignore this is to take additional risk at your own peril. Precious metals are not good to purchase consumables during time of crisis, so it is by no means an end in itself. Precious metals ARE good to offset the rapid rise in inflation. Keeping this in mind, I have noticed that the price of Platinum over the past 30-35 years was generally 25% to 50% higher than the price of gold. This is the general historical relationship. The only exception that I have noticed was back in the early 1990’s, Platinum had dropped within $10-$15 of the price of gold. Platinum was a good buy at that time. This lasted for about a year or so. Today Platinum is even more of a good buy. Gold is at $1786.00 and Platinum is at $1720.00. This is a ratio not supported by value and historical patterns. I expect a correction with Platinum doing well in relation to gold and silver, like we saw in the early to mid 1990’s. Maybe even more so today, particularly if the economy does bounce back somewhat. Platinum has many more industrial uses (Like silver) so would be in even more demand if and when the economy begins to “recover”. A quick comment: Don’t purchase precious metals with the idea of buying and selling to make money. Purchase it for balance and as insurance against severe inflation. Today, it is imperative that you possess at least some precious metals as insurance. The point is that even if precious metals don’t go up, Platinum is still a good buy relative to other precious metals such as gold and silver.