As investors look for ways to diversify their portfolios and protect against inflation, precious metals such as gold and silver have become popular investments. However, investors should consider another precious metal for their portfolio: platinum.
Platinum is a rare and valuable metal with various industrial and investment applications. In this post, we’ll explore why having a platinum investment portfolio is a smart decision, the market trends of platinum, the risks associated with investing in platinum, and how to invest in this precious metal.
Why Platinum is a Smart Investment
With only around 190 metric tons mined annually, platinum is one of the rarest precious metals on earth. This rarity makes platinum a valuable investment as demand for the metal continues to outstrip supply.
In addition to its rarity, platinum has a range of industrial and technological applications. It’s a key component in catalytic converters, helping reduce car emissions and is also used in producing jewelry, electrical components, and medical equipment.
As an investment, platinum has historically performed well. While it doesn’t have the same cultural significance as gold or silver, platinum has consistently outperformed both metals over the past 20 years.
The Benefits of Investing in Platinum
- Potential for Growth: While platinum has historically performed well, its price remains lower than gold and silver. This means there is potential for growth in the value of platinum as demand for the metal increases.
- Diversification: Adding platinum to your portfolio can help diversify your holdings and reduce risk. Precious metals perform well during economic uncertainty, making them a useful hedge against inflation and market volatility.
- Supply and Demand: As mentioned earlier, platinum is a rare and valuable metal with limited supply. This scarcity means that demand for the metal is likely to remain strong, making it a potentially profitable investment.
- Inflation Hedge: As the value of paper currency declines over time due to inflation, the value of precious metals tends to increase. Like other precious metals, platinum is a useful hedge against inflation and can be a way to protect your wealth.
Market Trends of Platinum
The price of platinum can be influenced by geopolitical events, such as trade tensions and economic sanctions, which can impact the supply and demand dynamics of the metal. For example, in 2019, the price of platinum rose due to a strike at South African platinum mines, which disrupted the global supply chain.
In contrast, the COVID-19 pandemic has had a mixed impact on the platinum market, with a decrease in demand from the automotive industry due to the shift towards electric vehicles but an increase in demand for physical precious metals.
Platinum has a lower price but a higher industrial demand than other precious metals, such as gold, silver, palladium, and rhodium. Recently, a surge in demand for palladium and rhodium, also used in catalytic converters, has increased prices. However, the supply of these metals is more abundant than platinum, which could limit their long-term potential for growth.
Risks of Investing in Platinum
Like any investment, there are risks associated with investing in platinum. One of the biggest risks is the volatility of the market. The price of platinum can be affected by factors such as global economic conditions, changes in supply and demand, and geopolitical tensions.
Investors who purchase physical platinum bullion also face the risk of storage and security. Storing platinum requires proper security measures and can incur additional costs. However, these risks can be mitigated by purchasing from a reputable dealer and properly storing the metal.
Ways to Invest in Platinum
There are several ways to invest in platinum, depending on your investment goals and preferences:
- Physical Bullion: Purchasing platinum bullion in coins or bars from a reputable dealer is a tangible asset you can store and secure yourself. The most popular platinum bullion coins include the Platinum American Eagle, Platinum Canadian Maple Leaf, and Platinum Humpback Whale.
- Exchange-Traded Funds (ETFs): ETFs allow investors to invest in platinum without owning physical bullion. Instead, investors own shares in a fund that invests in platinum, making it a more convenient and accessible option.
- Mining Stocks: Investing in mining stocks of platinum mining companies is another option. The performance of mining stocks is correlated with the price of platinum, providing exposure to the platinum market without owning physical platinum.
- Mutual Funds: Mutual funds investing in precious metals may include platinum. These funds can provide diversification across a range of precious metals, including platinum.
Types of Platinum Bullion
Investors can purchase physical platinum bullion in various forms, including coins, buy gold bars online, and rounds. The most common platinum bullion coins are the Platinum american metals exchange, Platinum Canadian Maple Leaf, and Platinum Humpback Whale. These coins come in various sizes, from one-tenth of an ounce to one ounce, and offer a cost-effective way to invest in platinum.
Platinum bars are also available for purchase, ranging in weight from one ounce to 10 ounces or more. Fractional platinum bars are also available, allowing investors to purchase smaller amounts of platinum at a lower cost.
Premiums and liquidity can vary depending on the type of platinum bullion. Coins tend to have higher premiums than bars but are more easily recognizable and liquid. Investors should research and compare the premiums and liquidity of different types of platinum bullion before making a purchase.
Conclusion
With a variety of industrial and investment applications, platinum is a valuable and rare metal. As an investment, platinum offers several benefits, including diversification, an inflation hedge, and growth potential.
While the price of platinum can be affected by various factors, including geopolitical events and shifts in supply and demand, the scarcity of the metal means that demand is likely to remain strong.
Investors can purchase platinum, including physical bullion, ETFs, mining stocks, and mutual funds. The type of platinum bullion investors should depend on their investment goals and preferences.
Interested in adding platinum to your investment portfolio? Visit precious metals investment dealer to explore options and start building your precious metal portfolio today.