Investing in Platinum: A Beginner’s Guide
Have you been thinking of investing in platinum bars and coins? Here’s what you need to know about one of the world’s rarest precious metals.
While many people buy gold or silver, one precious metal that is often overlooked is platinum.
This metal is much rarer than gold and silver and has a wide range of applications, particularly in industries.
In this article we explain:
- What platinum is
- Where platinum is used
- What drives the price of platinum
- What platinum products you can get
What is platinum?
Platinum is one of six platinum-group metals (PGM) that also include ruthenium, rhodium, palladium, osmium, and iridium.
It is an extremely rare precious metal: so rare that all of the platinum ever mined could possibly fit into your house.
Did you know?
Platinum is 30 times rarer than gold. If it were all melted down and poured into an Olympic-sized pool it would barely touch your ankles. Gold, however, would fill three pools.
The large majority of the world’s platinum comes from South Africa, with Russia being the second-biggest supplier of the metal. Platinum is also mined, in smaller quantities, in Zimbabwe, Canada, and the U.S. in Montana.
What does it mean for investors?
The rarity of platinum gives it long-term value, making it a good investment option for those who are looking to diversify their portfolios with precious metals.
Where is platinum used?
Platinum is an extremely durable metal used in many industries. It is, for example, essential for the automotive industry, which uses it to make catalytic converters that help reduce vehicle emissions.
Platinum is also used in the petroleum, refining, and computer industries.
Here’s the list of industries using platinum:
🚗 Automobiles: Platinum is a critical component used to reduce pollution from gasoline and diesel-powered engines.
💍Jewelry: Because of its durability and shine, platinum is very desirable in fine jewelry.
♻️Green energy: Platinum is used to develop new green hydrogen-powered technology.
💊 Medicine: Platinum is used to make pacemakers and stents, as well as in the treatment of cancer and Parkinson's disease.
🖥️ Computers: A platinum alloy is used to coat computer hard drives.
What does it mean for investors?
Platinum can be an interesting investment for those who want to increase their exposure to precious metals in their investment portfolios, due to its exceptional characteristics as a precious metal, an industrial metal, and a green metal.
Platinum has been getting a lot of attention lately due to the boom in green hydrogen. With more and more manufacturers switching to green energy sources, investors speculate that platinum may see a lift in coming years.
What drives the price of platinum?
The platinum price is pretty volatile and can move dramatically at times. It usually happens due to several factors:
Events in South Africa: As we’ve mentioned above, the production of platinum is almost exclusively limited to South Africa, which is a pretty volatile emerging market.
Therefore, any major event in this country will have a big impact on the prices and trends in the platinum market.
For example, strikes at the platinum mines in South Africa can significantly decrease the world's platinum supply, causing platinum prices to skyrocket.
State of the auto industry: Since over a third of platinum is used in the auto industry, changes in that industry, where people buy more or fewer cars, will affect platinum prices.
Therefore, when the automotive industry is doing well, platinum prices tend to rise, and when times are tough for carmakers, they may fall.
Investor demand: Investor demand can drive platinum prices either up or down. Roughly speaking, if more people want to buy platinum, the price of the metal usually moves up. Conversely, if more people want to sell it, the price will fall.
U.S. dollar: A weaker dollar can discourage producers from increasing their output.
Depreciation of the U.S. dollar against the South African rand, for instance, will reduce profit margins for platinum miners in South Africa, thereby leading to a decrease in platinum supply on the global market.
What does it mean for investors?
One or several of these drivers might be a good indicator of upcoming movements in the price of platinum. So, if you’re looking to add platinum to your investment portfolio, it’s always useful to keep an eye on these key drivers.
What platinum products can you buy?
Now that you know about the basics of platinum, how it is used, and how its price is determined, it's time to look at the most popular platinum products available.
If you feel like adding some platinum to your investment portfolio, there are two ways to do it:
- Buy platinum bars and coins.
- Buy a platinum exchange-traded fund (ETF).
Platinum ETFs, like gold ETFs, are best suited to more experienced investors because they have slightly different drivers, risks, and benefits than physical platinum bars and coins. If you want to learn more about precious metals ETFs, read our article on gold ETFs.
But the most direct way to invest in platinum is with physical products like bars and coins. Let’s see what you can find on the market.
Platinum bars come in different shapes and sizes including 1 g, 5 g, and 100 g bars. Some minted bars can have an artistic design, like the famous Lady Fortuna range produced by MKS PAMP.
Here are some examples:
Platinum is subject to VAT in almost every country.
You can buy VAT-free platinum if you store it in a Swiss Free Port, a free economic zone where VAT doesn't apply.
Now, if you want to invest in platinum coins, you can get legal tender coins issued by official mints, including the famous Canadian Maple Leaf, American Eagle, or Britannia platinum coins.
In general, the range of physical platinum products for investment tends to be smaller than for other metals such as gold or silver.
But with growing investor interest in the metal, it’s possible that we’ll see the range of available platinum products expand in the coming years.
Should you buy platinum?
Platinum’s rarity and unique properties are what make it an interesting asset for many investors.
In addition to being a precious metal like gold and silver, platinum is widely used in the auto industry and jewelry and has a growing importance in green technologies.
Finally, platinum is mainly produced in South Africa, so any economic or political troubles in this country can affect its supply. Likewise, any changes in the automotive industry will most likely impact platinum prices.
For these reasons, the platinum price remains quite volatile, making it a historically riskier investment than gold, for example, but also one that is often appreciated by investors looking for more short-term profit.
So if you want to start investing in platinum, all you have to do now is choose a product that best matches your investment goals and strategy.
Subscribe to our Spotlight so that you don’t miss our upcoming article: How to invest in platinum.