platinum pieces

Platinum is widely used in a variety of sectors, and some market watchers believe platinum investing is compelling. Here’s how to invest in platinum.

Platinum is the third most traded precious metal in the world and the most commonly traded of the platinum-group metals. Also an industrial metal, platinum is widely used in a variety of sectors.

2020 was a year of record highs and record lows for platinum prices due to the COVID-19 pandemic, which prompted both a surge in investor demand for platinum as a precious metal and a loss of industrial demand from the automotive sector. However, the rally wasn't maintained in 2021, and although platinum prices spiked to over US$1,150 per ounce in early 2022 due to Russia’s war in Ukraine, they have pulled back.

Even so, the long-term platinum outlook remains strong based on supply constraints and rising demand from growth in sectors like hydrogen, a key element in the emerging green economy.

With that in mind, here’s a brief overview of platinum supply and demand dynamics, and a look at a few different ways to start investing in platinum.

Platinum investing: Supply and demand

South Africa is by far the world’s top platinum-producing country, according to US Geological Survey data, accounting for 72 percent of world production. The country also holds the largest-known reserves of platinum-group metals. In 2021, South Africa produced an estimated 130,000 ounces of the precious metal, up from 112,000 ounces the previous year, due to increased mining at the Bushveld Complex.

Production fluctuations from the world’s top platinum-producing countries have been a common trend over the years. According to the World Platinum Investment Council (WPIC), which provides quarterly market reports, total 2022 platinum supply is expected be down 5 percent compared to 2021.

"(We have made) significant downward revisions to 2022 mine supply expectations, driven by operational constraints, COVID- and safety-related disruptions, and labour and power shortages," the WPIC notes.

On the flip side, the WPIC is forecasting that total 2022 platinum demand will be up by 2 percent over 2021.

The automotive industry remains the world’s largest consumer of platinum, using the metal in catalytic converters for vehicle exhaust systems. Demand from this sector is “holding up relatively well despite supply chain challenges and China’s zero-COVID policy,” as per the WPIC. In addition, although industrial demand is lower than the record levels reached in 2021, 2022 is “expected to remain the third strongest year on record."

The transition to a green economy has created another growing market for platinum. Platinum-based electrolyzers are used to separate hydrogen from water, and that pure hydrogen can then be used in fuel cell-powered vehicles. Platinum is also used to fabricate fuel cells themselves.

In an interview with the Investing News Network, Trevor Raymond, director of research at the WPIC, noted that the adoption of hydrogen fuel cell technology could add 2 million to 4 million ounces to platinum demand in the next decade. The use of platinum-based electrolyzers to produce the hydrogen will generate 600,000 ounces of additional platinum demand in that same time period.

Platinum investing: How to invest in platinum

Investors who believe the above market dynamics will eventually result in a higher platinum price may be interested in investing in the metal. There are several ways to invest in platinum, with the first being through the direct purchase of physical platinum bars or platinum coins through a bullion dealer.

Another investment option is BullionVault’s online physical platinum market, which is open 24 hours a day, seven days a week. It is supported by the WPIC, and gives private individuals access to vaulted platinum for the same prices currently paid by institutional investors.

Those interested in physical platinum can also gain exposure via the Sprott Physical Platinum and Palladium Trust (ARCA:SPPP). It provides access to the physical platinum bullion market while allowing the flexibility of an exchange-traded security. Exchange-traded funds are another way to invest in the platinum market, and the ETFS Physical Platinum Shares (ARCA:PPLT) is one such option.

The final way to invest in platinum is, of course, to own shares of a platinum-mining company. Some of the top platinum companies by market cap include Anglo American Platinum (LSE:AAL,OTCQX:AAUKF), Impala Platinum Holdings (OTC Pink:IMPUY,JSE:IMP) and Tharisa (LSE:THS). One benefit of investing in a flourishing mining company is that they have a higher chance of not being negatively affected by downturns in the platinum spot price.

This is an updated version of an article first published by the Investing News Network in 2017.

Don’t forget to follow us @INN_Resource for real-time news updates!

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

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