If you’re considering investment options for diversifying your portfolio, platinum might be a choice. This metal is among the rarest precious metals found all across the globe and holds considerable industrial importance. Here is what it means to invest in platinum, and how it has performed over the years.
What is platinum and why is it valuable?
Of all metals, platinum is rarer than gold-the bulk of its supplies coming from South Africa. For some industries, this piece of metal is priceless including:
- Automotive – Used in catalytic converters to lower vehicle emissions.
- Jewelry – Highly desired for use in high-end jewelry products because of its strength and luster.
- Technology and medicine: Vital fields for electronics and medical devices, even for cancer therapy.
- Hydrogen fuel cells: The area where platinum is being applied in clean energy production.
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How has platinum performed historically?
Over the years, there have been variations in Platinum prices as shown below:
- In the early 2000s, platinum was in the range of $600 to $700 per ounce.
- In 2008, it reached an all-time high of over $2,200 per ounce before crashing hugely during the financial crisis.
- Between 2010 and 2020, platinum never recovered to its highest levels, usually trading between $800 and $1,200 per ounce.
- Platinum has been fluctuating around $900 to $1,100 an ounce recently, based on supply constraints and industrial demand.
While platinum has not consistently outperformed gold, its prices rise in periods of strong industrial demand and economic stability
How can you invest in platinum?
You have many options available for investing in platinum, which suits various risk appetites and investment objectives.
1. Buy physical platinum – to get the best quality, buy platinum bars or coins from reputable dealers. Remember that:
- Secure storage will be necessary: Physical platinum must be stored carefully. They are different from stocks which do not require such concern.
- Premiums and charges apply: The dealers charge a premium price which is above market prices.
- This is a long-term investment: Compared to stocks or ETFs, selling physical platinum can involve long waiting periods.
Read more: How to invest in palladium and how has it performed historically
2. Invest in platinum Exchange-Traded Funds (ETFs)
With platinum exchange-traded funds (ETFs), investing in platinum without owning it physically is possible. The funds track the price of platinum for trade in the stock exchange market. Benefits include:
- Easier to trade: You buy and sell ETFs just like stocks.
- Storage is of a lesser concern: When you buy, it is the fund that holds your platinum and not you.
- Diversification: Some ETFs may also include other precious metals.
3. Buy shares in platinum mining companies
Investing in platinum-producing mining companies can also give you an opportunity to be an investor in this metal. These companies are some of the biggest platinum mining companies in the world:
- Anglo American Platinum – Headquartered in South Africa, this company is the largest platinum producer in the world.
- Impala platinum holdings – It has mining operations in South Africa and Zimbabwe and is one of the important platinum mining groups.
- Sibanye Stillwater – A mining company involved in platinum, palladium, and gold mining activities across various countries. Investments in such companies bear additional risks, as their share prices are very often influenced by considerations beyond platinum price, such as labor disputes, mining costs, and political considerations.
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4. Invest in platinum mutual funds
Some mutual funds focus on commodities, including platinum. These funds invest in a mix of mining companies and precious metal holdings, offering:
- Diversification: Reduces the risk of investing in a single company.
- Professional management: Fund managers make investment decisions for you.
- Potential for growth: If platinum prices rise, these funds could perform well.
What factors affect the price of platinum?
Like all commodities, platinum price is governed by supply and demand. Key drivers are:
- Supply limitations: Most of the world’s platinum comes from South Africa, so interruption to mining (for example, strikes or government interference) can influence supply.
- Industrial demand: The motor industry is a massive consumer of platinum, so demand will fluctuate with car production trends.
- Economic factors: Economic downturns make demand for platinum fall, lowering prices.
- Competition from other metals: Palladium, another metal used in catalytic converters, has on occasion replaced platinum in car manufacturing, affecting demand.
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