Platinum offers a better long-term bet than gold as rising auto production boosts demand for the white metal, while art is also a good bet for investors worried about growing money supply, Castlestone Management says.
Platinum prices have risen 16 percent since the start of the year to just under $1,700 per troy ounce, while gold hit a record high of $1,364.6 on Thursday and is up some 22 percent year-to-date as investors seek the safety of precious metals amid moves by central banks to pump cash into the system to spur economic growth.
"In an economic environment where growth remains 1-2 percent per annum and there are no major economic problems... platinum will be the better-performing metal," Castlestone founder Angus Murray told Reuters in an interview.
About half of all platinum produced today is used in catalytic converters, which reduce air pollution by cars.
"If you assume that you are going to get continued industrialization in China and you add in Brazil, then you are clearly going to get significant increases in demand for cars," he said.
The platinum that went into these catalytic converters could not be easily retrieved unlike the gold in jewellery, which has a 99 percent recovery rate, he added.
Castlestone was founded in December 1996 as a family office by Murray, a former president of Australian bank Macquarie's (MQG.AX) U.S. operations. Besides advising wealthy clients, the firm also manages about $360 million (227 million pounds) in alternative investments.
The firm's Aliquot Gold Bullion fund has gained 12 percent in the eight months ended August, while its precious metals fund, which invests in gold, silver and platinum, rose 7.7 percent over the same period.
Murray said Castlestone is considering raising the fund's allocation to platinum at the expense of silver from the current default ratio of one-third per precious metal.
VALUE IN ART
Murray said investors concerned about so-called "quantitative easing" by central banks can also consider diversifying into art.
"We can produce more gold but we cannot produce another Andy Warhol... The reason why art doesn't perform as well as gold is the bid-offer spread in gold is virtually zero, whereas for art it can be 20 percent."`
Castlestone modern arts fund owns works by the likes of Warhol and Roy Lichtenstein and functions like a private equity fund in that it draws money from investors whenever it wants to acquire an asset.
Murray said precious metals and arts will perform well in the foreseeable future as they are both good hedges against the vast expansion of money supply by Western governments and central banks trying to kickstart their economies.
"What characteristics those two things is that if we go to the core of the debasement of currencies, what you discover is that if the value of money is falling, the value of real assets will rise."
