How to Invest in Platinum

Platinum is widely used in the automotive, industrial, jewelry and investment sectors. Here's why investors should take note of this metal, and the basics of how to invest in platinum.

how to invest in platinum

Although platinum is a rare metal, it is the third-most traded precious metal in the world. Demand for platinum is growing as it is widely used in the automotive, industrial, jewelry and investment sectors.

That said, the precious metal reached its fifth consecutive year of deficit in 2016 and is expected to continue this trend in 2017, supported by cuts in mine production.

According to the WPIC, the platinum market will shrink to its narrowest since 2011 this year, due to a drop in investment interest and a declining share of diesel vehicles in the European car market.

With that in mind, here’s a brief overview of why investors should keep an eye on platinum and how to invest in the precious metal once they are ready to jump into the sector.

Why Invest in Platinum?

South Africa is the world’s top platinum-producing country, accounting for 70 percent of the world production, and holds the largest-known reserves of platinum group metals globally. But mine production dropped in 2016 due to several mine stoppages in the country.

The World Platinum Investment Council (WPIC) is now predicting a platinum deficit of 120,000 ounces in 2017, as reported in its recently revised forecast for the year. Last year there was a wider-than-expected deficit of 270,000 ounces.

“We believe that platinum is poised to regain the portion of its value related to its industrial applications and its strong supply/demand fundamentals,” WPIC CEO Paul Wilson notes.

On the demand side, the automotive industry is the world’s largest consumer of the metal, which is used as a catalytic converter for vehicle exhaust systems. Automotive production is forecast to jump in the coming years, particularly in developing markets, and that is expected to ensure healthy demand for platinum into the future.

“China is a big part of this story,” Jonathan Butler, a precious metals strategist at Mitsubishi (TSE:8058), said. “The level of car ownership is still growing, and there are signs that it could get to western levels.”

The WPIC says that in 2017, automotive sector demand is expected to remain relatively stable, dropping a marginal 15,000 ounces to 3.39 million ounces.

That said, over half of FocusEconomics’ panelists see platinum prices notably exceeding 2016’s levels and averaging above $1,000 per troy ounce in the last quarter of 2017. The most optimistic is ANZ with a forecast of $1,150 while the most pessimistic is ABN Amro with an estimated price of $850 for the last quarter of 2017.

How to Invest in Platinum

Consumers and investors who are interested in platinum have several investing options. The first is to purchase physical platinum bars or coins directly, which can be done through a bullion dealer.

The Sprott Physical Platinum and Palladium Trust (NYSEARCA:SPPP) provides investors with access to the physical platinum bullion market while allowing the flexibility of an exchange-traded security.

Most recently, the WPIC, in partnership with BullionVault, launched the lowest-cost physical platinum market that is open 24 hours a day and, for the first time, private individuals have access to vaulted platinum at the same costs currently paid by institutional investors.

Another option is to buy platinum through an exchange-traded fund (ETF). ETFs are securities that track platinum like an index fund, but that trade like stocks on an exchange.

ETFS Physical Platinum Shares (NYSEARCA:PPLT) aims to make investing in platinum more accessible by offering a comprehensive range of exchange-traded commodities.

A third option for investing in platinum is, of course, to own shares of a platinum mining company. Some of the top platinum companies include Wallbridge Mining Company (TSX:WM,FWB:WC7), Impala Platinum Holdings (JSE:IMP,OTCPink:IMPUY), Lonmin (LSE:LMI) and Anglo American Platinum (LSE:AAL).

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Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.

Editorial Disclosure: Wallbridge Mining is a client of the Investing News Network. This article is not paid-for content.

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