Commodities
Investing in Platinum – Everything you Need to Know
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Why Invest in Platinum?
If you are considering investing in precious metals, it is very likely that you have already looked into investing in gold, and investing in silver. These are the two best known, and most popular in terms of volume of investors who trade the two. There are others though.
One of these “other” precious metals which is often overlooked, is platinum. This precious metal actually often comes with the highest price tag of all three mentioned. This is due to the fact that it is rarer than gold, and more difficult to extract.
As an in demand industrial metal, it is another excellent choice to consider adding to your portfolio of precious metal investments. Here we will take a closer look at what moves the price of platinum, and how you can get in on the action.
What Influences Platinum Prices?
Similar to silver, and other precious metals which are frequently considered as “industrial metals”, platinum is open to many of the same factors which can lead to fluctuations in the price. Though it is a very high value precious metal, and can act as a store of value in similar fashion to gold, it is much more exposed to the laws of supply and demand as they typically apply.
Auto Demand: Platinum experiences huge demand from the car industry. This is due to the fact platinum is a key component in catalytic converters which are used to reduce the emissions of vehicles around the world. This means the price of platinum can largely move in tandem with demand from the auto industry for new vehicles.
Currency Strength: This point particularly applies to the USD rate against the South African Rand, and Russian Ruble. This is because the vast majority of the world’s platinum comes from these two nations, and is paid for in US Dollars. Therefore, a weaker dollar usually removes some incentive from platinum mining. This can decrease supply, and in the process, lead to higher prices.
Political Stability: As mentioned above, the vast majority, in excess of 75% of the platinum supply in the world is mined in South Africa, and Russia. This means that the political situation in both nations, and their relations around the word, but particularly with the US, and China as two of the world’s major buyers has vital significance. Any kind of geopolitical issues, tariffs, or trade restrictions, could have a big influence on the price of platinum.
Investing in Platinum
Having taken a look at the key factors which move the value dial in the platinum markets, if you are interested in making an investment, there are a number of relatively easy ways that you can do so:
Physical Platinum: Platinum in the form of coins and bars is definitely the most direct way to get involved in the market. Similar to the other choices though, it is decidedly more difficult to purchase platinum, with a reduced number of reputed suppliers in line with the rarity of the metal itself.
The company we recommend to buy Platinum Directly is Bullion Vault.
Platinum Stocks: This is a popular investment route where again there are several, but certainly not an abundance, of platinum stocks which you can invest in on the equities market through your broker. These are typically in the largest platinum mining and production operations both in South Africa, and North America. Some of these mining companies though, may also be involved with other metals which could leave you vulnerable even if platinum prices are on the rise.
Platinum ETFs: Platinum ETFs, just like they do in other areas of the market, provide a broader exposure to the industry. This means a platinum ETF can be an investment in mining and production companies of platinum, as well as in other areas. This is the simplest way you can become invested in Platinum, and although each ETF is different, your risks are hedged in a sense with an ETF. They are also liquid when it comes to getting in, or leaving your position if the price goes against you. Many major brokers will cater for a selection of platinum ETFs.
You could also get involved in trading platinum futures and options which are very popular when it comes to commodities trading, but as a newer investor, the less volatile methods above are recommended for your first ventures into precious metal trading.
Platinum Risks
Just as with any other form of investment, there is the inherent risk of a downturn in the market. To this end you should have yourself protected by a solid risk management strategy.
There is no doubt that platinum prices are considerably more volatile than gold, or even silver. This may mean they are not suited to every investor. Over the longer term though, they have still showcased strong returns.
Within shorter time periods of 3-5 years, platinum prices can swing a lot, and are currently at a price which is not very far from a 10-year low. This is due to a number of factors, not least the drop off in vehicle demand due to the 2020 COVID-19 pandemic. Many may see this as an opportune time to get value from the platinum market considering it has for now been temporarily displaced by gold in terms of value as the latter reaches for all-time highs.
Where to Buy Platinum
Considering that Platinum is a premium precious metal asset it can be surprisingly tricky to find a trustworthy supplier. We currently recommend European based Bitpanda (United States Prohibited).
Final Thoughts
While the gold and silver markets certainly grab the headlines when it comes to trading in precious metals, it is worth remembering that, although there may be a few less pathways open to doing so, an investment in platinum is still a relatively easy feat to accomplish.
Combine this with the current dip in the platinum market where it unusually sits below the price of gold, and you may have an ideal opportunity to add new diversity to your portfolio.
