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Investing In Platinum

November 10th, 2016 by

Platinum shares a kinship with silver in that both metals are simultaneously industrial metals and precious metals. This creates interesting dynamics in the supply and demand for platinum in ways that differ from gold.

Yet the platinum price still stands out for its history of typically trading close to parity with gold. In fact, platinum has historically traded at a higher price than its precious metal counterpart, only falling below gold in early 2015. It has yet to reclaim the higher ground since.

Especially for precious metal investors who are closely watching the gold-platinum ratio in search of opportunities, the upside of adding platinum bullion to one’s portfolio is matched by the many options that are now available for buying investment-grade platinum.

Options Abound

As mentioned above, platinum’s primary source of demand comes from industry. It is an extremely useful metal for the catalytic converters in automobiles that help filter air pollution. This is why an increase in car sales typically supports higher demand for platinum.

Platinum is also used in jewelry like the other precious metals, however. In this way, it enjoys demand as a luxury retail product to some extent. At the same time, its high intrinsic value as a tangible asset also makes it attractive as an alternative investment. This is particularly true when an investment portfolio already includes gold and silver; platinum can offer some further diversity in the precious metals sphere.

2017 platinum krugerrand

Image courtesy of AgAuNews.com

Besides platinum jewelry, which is typically not pure enough to reach “investment-grade” status, there are a number of choices when you’re looking to buy platinum bullion. Most platinum bars are struck from .9995 fine (99.95% pure) platinum, making them a convenient way to add physical platinum to your portfolio or your individual retirement account (IRA). Yet it’s also worth pointing out that government mints have been expanding the range of precious metal products they offer to include legal tender platinum coins.

In addition to the Royal Canadian Mint’s Platinum Maple Leaf coin, the U.S. Mint has brought back the bullion version of its American Platinum Eagle coin this year after a multiyear hiatus. Two new platinum bullion coins are making debuts, as well: the Rand Refinery’s 50th anniversary South African Platinum Krugerrand and the Austrian Mint’s Platinum Philharmonic are joining the group.

Compared to platinum bars, these bullion coins carry slightly higher premia thanks to their higher production cost and official legal tender status. When it comes to the paper markets, Coin World points out that there are also exchange-traded funds (ETFs) that track platinum, such as the Physical Platinum Shares (PPLT). Although this form of buying platinum allows investors more convenient exposure to platinum in their portfolio because there are no storage fees, keep in mind that ETFs don’t necessarily offer investors the same safety of a tangible asset outside of the financial system the way that physical platinum bullion does.

 

The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product.