After checking Monex on Thursday, I noticed that the price of one ounce of platinum fell by $54. This is important, and it is also something to look at as we advance further into this economic crisis we are still enveloped in.What is the cause of this sudden downward spiral in platinum prices?
It could be a lessening of inflation. However, that analysis hardly seems likely. Sen. Rand Paul (R-KY) has issued a press release in which he says that the debt ceiling increase “does nothing to fix the overreaches of both parties” and will only result in “trillions of dollars in new debt.” This mechanism will only allow the federal government and the Federal Reserve to give itself the authority to increase our national debt, increase the money supply, and devalue our dollar.
One possible reason for the large decrease in platinum prices is platinum mining. According to David Davis and Johan Bruwer of Credit Suisse, the rapidly expanding platinum mining industry in South Africa could have a major effect on prices as platinum becomes oversupplied. Simply put, as the supply of good or service increases (all other factors being equal), the price of said good or service is devalued. For example, the inflation of our currency over one hundred years has led to a devaluation of our dollar by over ninety-five percent of its 1913 standard.
Of course, investors could see this last major debate on the debt as a good sign of things to come. When good economic news bursts onto the scene, the price of precious metals drops due a decrease in demand for precious metals.
Obviously, I’m not an expert on precious metals or investing, but either the market is telling us that there is an increase in the supply of platinum or the government is falsely leading investors into thinking that the market and the dollar’s purchasing power are slowly getting better. I hope for everyone’s sake that the reason for the drop in platinum prices is the former. If the reason is government intervention, we may be in the beginning of a precious metals bubble.Published in