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How Automakers Affect the Platinum Market

There’s certainly a lot of talk going on in many circles about how the auto companies spending their money. Now that the average citizen could be said to own a stake in the “Big Three” US automakers, it’s reasonable to wonder how they got in that situation. The actions of US automakers may be thought of as a cautionary tale when it comes to moving precious metals markets. They also demonstrate what sort of ripple effects the actions and tribulations of the big players in the auto industry on the precious metals markets worldwide.

Automakers use a great deal of platinum when they’re selling cars due to the use of the metal in catalytic converters. But, when auto sales fell off in 2008, precious metal investing sent the price of platinum downward due to lack of demand. Then, as if by magic, it surged above $1,000 an ounce in early 2009 in response to the $15 billion rescue package passed by Congress at the end of 2008.

As for the history of automakers and precious metal investing, the production of vehicles and speculation about platinum caused the price to reach record highs in 2006. The amount available also began to slow, causing demand to far outstrip production in 2007.

This potential shortage of platinum caused US automakers to stockpile the metal at nearly record prices, as they spent billions to keep it in supply as demand for cars and trucks remained strong. Shortly thereafter, precious metal investing promptly began a long crash that continued until a government-aided bonanza brought the price back up in early 2009.

Research that would drastically reduce the amount of platinum – as much as tenfold or more – and utilize different platinum-group metals has been performed in Japan. This technology may be seen in Mazda or Ford vehicles first.

In the meanwhile, US automakers have taken advantage of substituting the relatively less expensive palladium. However, European auto manufacturers, who make a far higher proportion of diesel vehicles, wind up using more than their fair share of platinum – nearly half the world’s supply as produced during the ’aughts.

Though the billions of dollars that were spent trying to temporarily corner the platinum market are long gone and perhaps small compared to some of the other things automakers spend the big bucks on, their influence is far from waning. It is thought that an increase in the proportion of diesel and electric vehicles (as well as technological advances), in part at the bequest of the incoming Obama administration, could change the way that platinum is valued for many years to come.

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