Gold Alternative #1: Platinum
Platinum sure can’t face the same criticism from Buffett. A third of its annual output goes to industry — for everything from dental to medical devices — while another third goes to automobile parts — more specifically, catalytic converters.
But such a focus on the auto industry also explains why the metal hasn’t been looking so hot as of late. Platinum prices have been falling and currently are hovering around $1,400 compared to a six-month high around $1,700 and a $1,900 high in the past year.
Automotive sales have been on the rise in recent months, but carmakers still are facing struggles thanks to economic woes at home and abroad. Right now, for example, the average car in the U.S. is 11 years old — and without the demand for new cars, there also isn’t demand for parts like catalytic converters. But that can’t last forever. In fact, vehicle production is expected to increase by about 60% by 2020. And diesel engines, which rely most heavily on platinum catalysts, have seen sales begin to grow, and more diesel products are expected to be introduced because of such recent success.
So, just as there was money to be made as platinum rebounded from the crushing it (and the auto sector) took during the financial crisis — it dropped two-thirds of its price in 2008, then rose 150% for the next three years — expected growth in automotive demand could present a similar opportunity.
Platinum, like gold, can be bought in bars and coins, but also through ETFs like the ETFS Physical Platinum Shares (NYSE:PPLT). PPLT is slightly up year-to-date after shedding much of its early 2012 gains, as it moves in lockstep with the metal.