Why Platinum Could Surge Higher From Here
The U.S. is offloading dollars for critical minerals... And so should you.
The goal is to bolster domestic industries critical to national security and to secure domestic supply chains.
To that end, the government has taken direct equity stakes in private businesses and made loans and grants to promote various industries – including critical minerals, artificial intelligence, semiconductors, national defense, manufacturing, infrastructure, and energy.
A few noteworthy deals in the minerals space include the Department of Defense's $400 million equity stake and $150 million loan to rare earth element ("REE") miner and refiner MP Materials (MP), and the U.S. International Development Finance Corporation's $105 million equity stake in critical minerals mining company TechMet. There are many more.
What's the federal government's endgame? And why now?
Let's have a look...
The U.S. Has Relied on the Strength of the Dollar for Too Long
It wasn't so long ago that the U.S. was a major producer of critical minerals. Looking at rare earths specifically, the Mountain Pass Rare Earth Mine – owned by the above-mentioned MP Materials – once supplied 70% of global demand for rare earths in the 1970s. That was enough to supply 100% of U.S. rare earth demand.
The problem is that over time, the U.S.'s manufacturing muscle has atrophied. America began relying on foreign trading partners for these types of goods. And because the U.S. dollar ("USD") is the world's reserve currency, there's always demand for the currency.
It's understandable. It's a nice deal to be able to trade pieces of green paper for commodities like oil and copper, or for freshly manufactured products from Asia. It lowers people's cost of living.
But the fact is that America has been relying on the USD's reserve currency status at the expense of many domestic industries for a long time.
That's put the country in a tenuous position where key organizations like the military are dependent on adversaries like China to supply critical minerals – like REEs.
A consensus seems to have now been reached among the political class that it's impossible for the U.S. to retain its leadership position in the world without restoring these capabilities. And they're opening up the spending spigot.
Above, I mentioned some of the recent deals. But that's not all. We're talking about $25 billion in direct government grants, loans, and equity stakes since the start of the year – just to support the mining, processing, and stockpiling of critical minerals alone.
These are the 60 minerals essential to the U.S. economy and national security, whose supply chains are vulnerable to disruption. These include critical minerals like copper, uranium, lithium, cobalt, antimony, REEs, platinum, and others.
Critical minerals are only one piece of the puzzle... Altogether, trillions of dollars in capital will be needed to build out the energy grid to power AI and to onshore high-tech manufacturing, among many other initiatives.
The scale of the undertaking is enormous. There's no way the private sector can foot this bill alone. The government is going to have to backstop these initiatives with its purse.
The spending is just getting started... And it's going to be inflationary.
You may have heard of the "debasement trade" where investors are moving capital out of fiat currencies like the USD and into hard assets like gold, silver, real estate, and blue-chip stocks to protect against the loss of purchasing power.
This strategy is driven by concerns over high government debt levels (the national debt is now over $38 trillion and growing), persistent fiscal deficits with no serious effort to rein in spending ($1.8 trillion and growing), and Federal Reserve policies to cut interest rates.
These policies all lead to one thing... a deliberate reduction in the purchasing power of the USD.
This debasement trade is not only alive and well... It's about to accelerate.
Smart investors are already sniffing it out... It's no coincidence gold is up 53% and silver is up 65% over the past year.
And there's one more critical mineral/precious metal that offers similar benefits to gold and silver. It's a store of value with tremendous upside. Plus, current supply-and-demand dynamics make it a coiled spring.
I'm talking about platinum.
The Metal Used in Industry and for Wealth Preservation
Gold is mostly a monetary metal that does have some industrial applications – mostly in jewelry... whereas silver is mostly an industrial metal.
It's resistant to corrosion and the world's best conductor of electricity. For that reason, you'll find it in circuit boards and other electronics. Silver was also the historic foot soldier of past monetary systems – since it has always been a fraction of the cost of gold and therefore easier to use for everyday transactions.
Platinum is a bit different. Because large-scale platinum deposits were only discovered in 1822, the metal lacks the monetary history of both gold and silver. So today, it's mostly an industrial metal.
The metal is crucial for everything from automotive emissions technology to medical treatments to missile defense systems.
All the platinum ever mined would only come up to your ankles in an Olympic-sized swimming pool. It's up to 30 times rarer than gold.
You can see a breakdown of platinum demand in the chart below...
The largest use for platinum by far comes from the automotive industry. Trade organization the World Platinum Investment Council ("WPIC") expects it to account for 38% of the almost 8 million ounces of expected demand in 2025.
That's because platinum – along with fellow platinum group metals ("PGMs") palladium and rhodium – is crucial for catalytic converters.
This component is located between the engine and tailpipe on your car or truck. It makes exhaust gases safer as they exit the vehicle. Platinum, palladium, and rhodium have metallic properties that make the chemical reaction possible.
The second-largest use for platinum is for making jewelry. With gold prices up 53% over the past year, many folks can no longer afford gold jewelry and are turning to platinum instead.
The WPIC now expects jewelry to account for 27% of all platinum demand in 2025 – up from 24% of all platinum demand in 2024.
And it's not just the U.S. that considers platinum to be a critical mineral. It has the same status in China, the EU, and the U.K. as well.
A big reason for this is because platinum is the least reactive metal known to man. That means it's highly resistant to corrosion and oxidation. So it doesn't tarnish or rust.
That's why it's the only material suitable for the electrodes required in the 600,000 pacemakers implanted each year. And there are a lot of cases like this, where no other metal can duplicate what platinum does.
Platinum is also highly ductile. One gram of platinum can be stretched into a milelong wire. Or it could be pounded into a sheet as thin as 100 atoms.
These unique qualities make platinum indispensable for a lot of different medical and industrial applications.
The Supply/Demand Picture Makes Platinum Prices a Coiled Spring
Right now, there's not enough platinum to meet demand. It has been that way for many years. And it's not changing anytime soon...
The platinum market saw a deficit of 896,000 ounces in 2023. That jumped to 992,000 ounces in 2024. And the WPIC forecasts platinum will see its third successive annual shortfall in 2025 at 966,000 ounces.
Going further out, the WPIC projects platinum will stay in a deficit every year through 2029. That's called a "structural deficit"...
Simply put... platinum supply can't keep up with demand. There's little incentive for miners to invest in new mines with low platinum prices. And recycling is below historical averages for the same reason.
As a result, the WPIC expects platinum supply to fall below 7 million ounces in 2025. That's roughly 5.4 million ounces produced from mining and 1.6 million ounces from recycling.
Meanwhile, the WPIC expects demand to stay strong, at around 8 million ounces in 2025. That leads to an almost 1-million-ounce deficit for 2025.
The WPIC and precious metals consulting firm Metals Focus expect annual platinum deficits to average 620,000 ounces per year from 2025 to 2029, or 8% of average annual demand.
The price of platinum needs to go much higher to prevent deficits.
Platinum Is Already Showing Signs of Life
With the growing demand and structural deficits, it's no surprise that platinum has finally woken up. What you should notice in the chart below is that platinum traded sideways for years. But now, that has changed.
Prices are up around 65% since their recent bottom of $923 per ounce on April 4...
And it's just getting started...
As you can see in the chart below, gold is up around 121% since the start of 2023. Meanwhile, platinum has only gone up around 41%.
Gold plays a crucial role as a reserve asset in the international monetary system. So there's a good reason why its rise is outpacing platinum's. But the gap is set to narrow.
Like gold, platinum also serves as a store of value. Demand for it is strong, and supply is constrained. The imbalance is set to continue through 2029.
Meanwhile, the supply shortfalls are eating into above-ground stores.
In 2024, there were 3.8 million ounces of above-ground platinum stocks. The WPIC and Metals Focus estimate that number will fall to 731,000 by 2029.
Given the supply-and-demand factors, it's only a matter of time before platinum realigns with historical trading patterns in relation to gold.
Since the beginning of 1987, gold has traded on average at 1.07 times the price of platinum. That means it has been around the same price as platinum, but at a slight premium.
But there were long stretches of time from late 1987 to 2011 where platinum traded for more than gold. And from 2000 to 2008, platinum often traded for around twice the price. Take a look...
With the gap today, platinum is extremely undervalued in relation to gold. In fact, the gold/platinum ratio is hovering near its highest level in almost four decades.
But platinum has a history of spiking fast when supply gets compressed... like we're seeing now.
It nearly doubled from the beginning of 2007 to the middle of 2008... then again from the beginning of 2009 through the first quarter of 2011... and once again from March 2020 to May 2021. Take a look...
The recent spike is likely just the start of a much bigger move...
Owning physical platinum is a great way to play higher prices. You can contact a reputable coin dealer to buy it. American Eagles, U.K. Britannias, Canadian Maple Leafs, and Australian Kangaroos are good choices for coins if you want to invest in physical platinum.
Source: Apmex
You can also invest in a physical trust that owns allocated platinum in a vault.
The Sprott Physical Platinum and Palladium Trust (SPPP) for instance holds around 239,000 ounces of platinum and 156,000 ounces of palladium at the Royal Canadian Mint. It allows for physical convertibility under specific circumstances.
At this point, the supply and demand dynamics favor platinum over palladium (though palladium is rarer). But the two trade in a close enough range that SPPP is still a good option if you prefer to own allocated physical metal in a trust without worrying about storage.
And if you're looking for leveraged upside, you can buy select platinum miners with millions of ounces of production per year set to disproportionately benefit from rising platinum prices.
The government is swapping dollars for critical minerals. You should consider doing the same. Buy platinum.
Editor's note: A strange change is coming to the stock market – and it's about to have dramatic consequences for anyone over the age of 50.
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