Catalysts in Place For Platinum's Rise

Is platinum undervalued at just under $1,800 an ounce (the spot price just a few minutes ago)? The answer very could be "yes," and if traders start to respond to that effect, the ETFs Physical Platinum Shares could be in for big things as 2011 wears on.

As Nicholas Pardini notes on Seeking Alpha, the platinum/gold ratio is currently 1.19, but the historical average is 1.95, so for those that are believers in all things reverting to the mean, now would be a fine time to look at PPLT.

There's more. Since platinum has plenty of industrial uses, far more than gold actually, the metal was crushed during the financial crisis in 2008. At its March 2008 high, platinum was flirting with $2,300 an ounce. It hasn't come close to those levels since. Perhaps that indicates that the metal is in fact cheap at $1,800. It certainly would be if it returns to $2,300.

So while gold and silver have surged, platinum has been left behind in recent weeks. How long gold can go on sharply outperforming platinum, its far more rare counterpart (global platinum production is only about 8% that of gold), is anyone's guess. The SPDR Gold Shares is up 4% year-to-date while PPLT is flat and the two have moved inverse of each other for a couple of months now.

That's bucking a historical trend. From 2002 through late 2008, platinum and gold shared one of the most intimate correlations in the metals space and once that trend resumes, PPLT should start to outperform.

Hi ho platinum may well be the next metals mantra.