WPIC reaffirms aim to work with IMF to make platinum a reserve asset

Otmane El Rhazi from The Bullion Desk.

The World Platinum Investment Council (WPIC) has reaffirmed that it would like to work with the International Monetary Fund (IMF) to try to make platinum a reserve asset.

“We’re starting to talk to governments about holding platinum in their reserves,” CEO Paul Wilson said at the Bloomberg and CME precious metals forum on Friday.

“Currently, it is not recognised as an official reserve asset, but if some countries could start to do that we could take that to the IMF and start to work with the IMF to try to change their mind,” he added.

Reserve assets are external assets that are readily available to and controlled by monetary authorities for meeting balance of payments financing needs, for intervention in exchange markets to affect the currency exchange rate and for other related purposes such as maintaining confidence in the currency and the economy, serving as a basis for foreign borrowing, according to the IMF.

The WPIC admits that platinum’s consideration as a reserve asset is a long-term prospect requiring a large number of central banks to get on board.

Its susceptibility to volatility may deter some central banks though supply-side issues may well play into its hands. The metal tends to fluctuate slightly more than gold although it has been largely stagnant for some time.

Platinum traded between $324 and $1,020 from 1991 to 2006 but from 2006 onwards it became proportionally more volatile, hitting highs of $2,300 and lows of $737.91 before settling around $1,120.

In contrast, gold, alongside typical reserve assets such as special drawing rights (SDRs), has been internationally recognised as a reserve asset for some time. At the end of 2014, central banks held around 30,900 tonnes of gold in their reserves, according to the World Gold Council – it is seen as portfolio insurance since it is a tangible store of value that protects against inflation and currency devaluations.

More specifically, gold – unlike many reserve assets – has almost no correlation to any other reserve asset and is thus favoured as a form of balance sheet diversification.

The six largest platinum miners in South Africa are backers of the WPIC, which formed last year. It aims not to sell the concept of platinum but to make investors better informed about the credentials of platinum as a form of investment.

The organisation revised its predicted deficit for this year to 190,000 ounces, which is 72 percent below its estimated 2014 shortfall of 670,000 ounces and well below other analysts’ estimates for this year nearer the 700,000-ounce mark.



(Editing by Mark Shaw)

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