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Friday June 13, 2008
Resource expert picks platinum
In his industry-leading Commodity Trend Alert he explains, "Prices continue to explode higher amid the largest supply shortfall for any precious metal this decade. As such, I'm urging my readers to buy the new platinum E-Tracs UBS Long Platinum exchange-traded note (NYSE: PTM)." "Find me a commodity - any commodity - that's approaching or extending a net supply deficit situation and I'll compel you to buy that commodity ahead of a major rally; that's what's happening now to platinum. Indeed, no other precious metal is suffering more from growing supply shortages since last year - and it's getting worse. 
"Platinum production in South Africa, which accounts for about 80% of global output, declined 4.9% to 5.04 million ounces in 2007 as a result of smelter closures and a host of safety issues that interrupted mining operations. "Worse, widespread electricity shortages in South Africa this year are lending to another major price increase as supplies continue to shrink and extend into a major net deficit situation. South African platinum output has hit its lowest levels since 2002 and continues to contract in 2008. "In a nutshell, this is the 'perfect storm' for a commodity bull. Unlike crude oil, which has doubled year-over-year and is in the midst of a parabolic bull market, spot platinum is much easier to quantify in terms of overall supply determination. "It's hard to hide platinum output; we know that one country mines more than 75% of all output, and if it can't boost supplies, it's an easy speculation that prices are going to rise much higher. "South Africa can't produce enough supply to meet demand. And according to Johnson Matthey, a metals and chemicals forecasting firm, global platinum output last year fell 4.1% to 6.55 million ounces - easily absorbed by the auto industry for catalytic converters and growing jewelry demand. "Since 2003, spot platinum prices have soared a cumulative 265% from $594 an ounce to $2,170 now. Platinum reached an all-time high of $2,290 in March and sits 5.2% below that best level. With supplies continuing to shrink, I think $2,500 is just around the corner; twelve months from now, $3,000 an ounce is possible, or a 38% gain. "According to RBC Capital Markets, platinum demand continues to average about 3-4% annual growth, mainly from catalytic converters and jewelry. If supplies, which declined more than 4% in 2007, extend into 2008, which is almost a virtual guarantee amid production problems in South Africa, we will have a much higher platinum price by Christmas. "The advent of exchange-traded-funds investing in platinum since last year in Switzerland and now in the United States since May will continue to suck more supplies from an already strained market. This is bad news for consumers, but great news for investors. "Tthe E-Tracs UBS Long Platinum ETN tracks platinum futures prices and rolls its forward contracts to nearby spot prior to contract expiration. It's a great way to play this metal, which offers the best correlation to spot prices. If supplies continue to decline in South Africa, the odds of a real run on platinum is a possibility." 
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News Flash
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"Platinum is a picture-perfect image of a classic bull market that's getting more exciting by the day," says commodity and resource expert