Gold (GLD), Silver (SLV) do not have Industrial Usage or Bright Future of Platinum

George Soros has greatly reduced his position in SPDR Gold shares (NYSE: GLD) and iShares Silver Trust (NYSE: SLV).  Soros did this as he expects interest rates to go higher, resulting in more capital going to Treasury bonds, which will bring the price of GLD and SLV down.  Small cap investors looking for commodity exposure should consider Platinum Group Metals (AMEX: PLG) for both speculative (buying based on the attractiveness of the market) and investing (buying based on the attractiveness of the company) factors.

Platinum has significant industrial usages, which should appeal to the small cap investor.  Catalytic converters in automobiles are the major market.  More and more cars are being produced as India, China and Brazil develop.  The great majority of gold, by comparison, is for investment purposes.  For silver, less than half of the production is used commercially. 

For the small cap speculator, the Chicago Mercantile Exchange has lowered margin requirements for platinum.  When margin requirements go up, commodity prices generally come down.  This happened for silver in May, as board officials moved to cool down the speculative interests. 

With platinum margins being lowered, the price should rise.  For platinum speculators, it will cost less to trade, which should lead prices upward based on basic supply and demand as there will be more buyers now.  Traders now only have to post $3,850.00 to for a 50-troy-ounce platinum futures contract.  Previously, it was $4,950.00 a contract for platinum.  Also coming down is the overnight cost, reduced to $3,500.00 from $4,500.00.

Platinum Group Metals has mining operations in South Africa and Canada.  Platinum, overall, has fallen as Japanese auto production has declined due to the March nuclear disaster.   Japan’s largest platinum refiner recently announced that said the global platinum surplus may leap eight-fold due to reduced demand from the auto industry.  There is significant institutional buying in PLG with ownership at almost 30 percent, a show of strength for any company particularly a small cap.  The price to earnings ratio is under ten, another very strong sign.