Council pursues goal for platinum
• Global council, set up and funded by six local-based firms, has a range of investment strategies it is pursuing, including joint ventures
The World Platinum Investment Council is continuing to meet central banks to encourage them to adopt the metal as a reserve currency, in the hope that enough of the institutions buy in to the thinking about the value of platinum to lead to broader uptake. The council was set up by six of SA’s platinum miners to promote investment in the metal.
The World Platinum Investment Council is continuing to meet with central banks to encourage them to adopt the metal as a reserve currency, in the hope that enough of the institutions buy in to the thinking around the value of platinum to lead to broader uptake.
The council, set up and funded by six South African platinum mining companies to promote investment in the metal, has a range of investment strategies it is pursuing, including joint ventures, and the quarterly release of supply and demand information to give investors a view of the market.
A coup for the council would be convincing central banks to add the metal to their reserves, joining gold, equities and bonds among the financial instruments they hold as a store of countries’ wealth.
It has been a difficult process, with a meeting at the IMF, which rules on what assets qualify for reserves, saying it would update its list in about six years’ time but that if enough central banks opted for platinum as a reserve product — much like equities were adopted by some central banks before an express IMF decision on their suitability — then it could be put on the list.
“It would be a wonderful thing if we could make it happen ... we’ve pursued it very hard for 18 months and we’ve spoken to various central banks,” said Paul Wilson, CEO of the council.
The council showed the banks data it had compiled comparing the performance of platinum with gold and how their portfolios would have fared with some platinum holdings.
“We’ve had a number of countries who are open to conversations with us, but to get platinum into your reserves you need to be assertive with the IMF and say we are going to do it because it makes sense for their country. “If two, three or four countries did that then it could be that the next time the IMF reviews its rules, which is in six years’ times, [it] might include platinum, which is what happened to equities,” Wilson said.
Talks with the IMF have been “glacial” and while it saw the merits of banks holding platinum it was not “an allowable asset they would encourage banks to put into reserves” and add to its list for the next six years, Wilson said.
The studies looked at bank portfolios containing 1.5% to 2% of platinum, in a gold-to-platinum ratio of 10 to one.
“If they did that, the riskadjusted return over time would improve with platinum in them,” Wilson said.
He declined to say which banks the council had spoken to and which ones it would speak to in the future about holding platinum as a reserve.
However, the South African Reserve Bank would be an obvious choice to add platinum to its $47bn worth of reserves, with SA the world’s single largest source of mined platinum.
Another source of demand would be a platinum coin minted in SA, much like the Krugerrand.