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It feels like everyone knows about the two primary precious metals, gold and silver. We'd even go out and say that some don't know there are two other metals in the precious category: platinum and palladium.
Of the two, platinum is definitely more recognizable and a household name. After all, we haven't heard of palladium records from music labels, right? Still, there's no denying that platinum has been very much overshadowed by gold and silver, both historically and in recent years.
Part of it has to do with it not being used as currency as the other two, as recognizability in investments tends to go a long way. Tying into that, people simply lack familiarity with platinum.
Only those with a good insight into the precious metals space can tell you what platinum is used for. The same can't exactly be said for gold and silver, which virtually everyone knows about.
We hope to demystify platinum investment and show you that it has very much earned its place as a precious metal. Likewise, we're looking to do away with the notion that platinum is inaccessible as an investment compared to gold and silver. In actuality, investment options are similarly varied and robust. Let's start with what is probably the first question on everyone's mind.
Is platinum a good investment?
It would be fair to say that the further one moves away from gold in the category of precious metals, the more one delves into the industrial sector. With platinum being the "third" precious metal, it therefore benefits not only from a safe-haven angle, but also heavy use in manufacturing. Its jewelry component is also very strong, certainly competing with gold and silver, though not outstripping them in this regard.
Platinum in industry
Platinum is a key component in many high-tech industrial products, but also in medicine. Platinum's unique composition makes it a tremendously useful metal for a variety of "things that go in the body", as our organism is less likely to reject the alloy than those of most, if not all other precious metals.
What one might call "stricter" industry makes just as much use of platinum. Wind turbines, solar panels and catalytic converters in cars are some examples of large machinery where lots of platinum can be found. Platinum is actually very scarce and some of its supply comes from scraping old cars, a point we'll touch upon soon.
Platinum in jewelry
The metal is certainly fashionable, and has been very popular in jewelry throughout history. Why has it dwindled in popularity? The answer is puzzling and perhaps a bit crude.
People want expensive things in their jewelry, and as the once-pricier-than-gold platinum fell below half the yellow metal's price, jewelry buyers looked elsewhere. This doesn't exactly make sense considering platinum is trading at $954 an ounce right now compared to silver's $22. It just goes to show how far recognizability can get an asset. Indeed, despite massively lower valuations, silver jewelry remains more popular.
Platinum's role in jewelry, however, can't be underestimated. What appeals to one person doesn't appeal to another, and platinum's durability compared to other precious metals, along with its lofty price, is sure to keep it a mainstay among those who love all things shiny.
Platinum's scarcity
The platinum market has an interesting supply picture to say the least. On paper, we have a surplus of supply on an annual basis. Yet the World Platinum Investment Council tells us that we should see year-on-year increases in platinum demand as the global automotive industry recovers. It's an example of just how prominent of a role the industrial component plays in the prices of something many view as not too dissimilar from gold.
The WPIC shared some interesting data that outlines how scarce platinum is and why the annual demand reports tell far from a complete tale. All of the gold ever produced would fit inside three Olympic swimming pools. All of the platinum ever produced would barely make it to your ankles in one. That's how little platinum there is going around.
Precious metals have always been about scarcity, and with such a fundamental picture, there is no denying platinum's value. But things get worse from there, or rather, better for platinum investors.
Mine supply
None of the precious metals have a particularly great supply picture. Gold fares the best here, but it's still suffering from the post-2011 cost-cutting of mining operations and lack of easily-accessible ore. Silver is mostly mined as a byproduct of other industrial metals. And then we get to platinum.
75% of it comes from South Africa, 7.5% from Zimbabwe and 10% from Russia. In other words, virtually all of the newly-mined platinum comes from countries that are unstable in one way or another. Should any of these countries experience an upheaval of any sort, supply could be squeezed in immense fashion and platinum prices could soar. We have seen precisely this unfold in Russia with palladium, of which it is a primary supplier.
Are there any risks associated with platinum investment?
The last 14 years of platinum price movement can tell you as much. Throughout most of history, platinum was worth more than gold, only to somehow find itself below half its price. Those who bought platinum when it was twice gold's price might be dissatisfied now, but they shouldn't be.
Precious metals are known for their mix of offering a safe-haven investment and their volatility. Gold and silver have both seen wild price upswings and downswings, despite gold's status as the safest investment. That platinum is seeing a price downswing now only means that an attractive entry point has been made.
Investing in platinum will give you exposure to an industrial asset without exposing you to too much risk. It can either be the lone precious metal in your portfolio, or be used as a riskier hedge with greater upside compared to other precious metals.
Should you buy platinum?
Why is platinum so cheap?
We went over some of the reasons: less popularity in jewelry, regulations that don't exactly benefit the metal and a sudden move from a supply deficit to an abundance on an annual basis. The tempting answer might be to say that platinum has fallen out of favor.
Any experienced investor, however, knows that puzzlingly-low valuations on assets with long-term value mean it's probably time to buy. Right now, platinum is definitely a long-term investment.
People are piling into gold even though it just hit consecutive all-time highs. We won't say it's the wrong idea, but the time to buy any asset is when it's low. And right now, platinum very much fits that description.
For what it's worth, both platinum coin and bar demand is on the rise despite falling prices. Clearly, investors aren't oblivious. And with green energy being pushed globally, something that platinum is intrinsically tied to, they are undoubtedly expecting an upside correction from what might seem strange valuations.
Related: Investor Guide Reveals IRS Loophole to Buy Physical Platinum Bullion (Tax-Free)
What are the investment options for platinum?
Like every precious metal, platinum investment options are split between paper and physical. We'll give the former a brief overview and focus on the latter, as we believe that bullion has no substitute when it comes to any of the four.
Paper platinum: ETPs, ETFs and stocks
As with any precious metal, there's no shortage of ways to get exposure to paper platinum. And as in the case with others, there are many issues with opting to go for this over bullion. Owning the paper derivative of any precious metal means you don't own the actual asset, only an IOU.
It introduces counterparty risk, forces you to mind a swathe of other factors and removes the satisfaction of owning a tangible asset.
If this is your preferred path, there are a number of low fee platinum ETFs that can be purchased via any of the top online brokers. Publicly traded platinum mining companies might also be a viable investment option for consideration for investors looking to buy platinum.
For many, the tangible part is of utmost importance when it comes to precious metals investment. These investors will be delighted to hear that the options to invest in physical platinum are just as alluring as those of any other precious metals.
Platinum bullion: more coins and bars than you'd expect
Platinum bullion coins and bars are so widespread and popular that they're not only IRA-eligible, but also issued by sovereign mints themselves. To make it into an IRA, platinum coins or bars must have a 0.9995 purity, higher than gold's 0.995 and silver's 0.999. This discounts collectibles, but still allows for a plethora of investment options from a variety of sources.
American Eagle Platinum, Australian Koala Platinum and Canadian Maple Leaf Platinum are examples of coins from top sovereign mints in the world, that being the U.S., Royal Canadian and Perth.
These coins are even recognized as legal tender by sovereign nations, showing that platinum very much holds its own compared to gold and silver. Platinum coins are known to carry a high premium compared to the other two metals. The rise of platinum coin demand despite this shows how sought-after this investment is.Those wanting a cheaper alternative that still has artistic and collectible value might be interested in platinum rounds, which tend to be churned out by private mints. They have less of a premium than coins but more than bars, and can be IRA-eligible if the purity requirement is met.
Platinum bars are, of course, an exceedingly popular choice. They are the most flexible form of physical platinum investment, coming in sizes anywhere from 1 gram to 1,000 grams. The less the bar weighs, the larger its premium will be.
One-ounce platinum bars tend to be a top choice among investors. These are dished out by various private mints, and your preferred choice of private mint might vary: each has its own take on bullion. Platinum bars are almost universally IRA-eligible bullion.
Whether you're purchasing physical platinum bullion for an IRA or simply to store in your or a third-party vault, the investment is unlikely to disappoint you. All precious metals are meant to be viewed as long-term stores of value as opposed to something that can make you a quick profit.
While you'll never have an issue with finding buyers for your platinum bullion, we recommend you hold onto it. Of course, always consult with a trusted advisor, but with current valuations, over a longer period of time, it seems that the price for platinum investments can only go up.
