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 commodity from the platinum-group metals. It is widely used in a variety of sectors, and in recent years high demand and low supply have pushed the platinum market into deficit.
Previous to this year, the price of platinum saw a decline of 50 percent over five years, but recent rallies have shown that the precious metal is on the upswing.
Although the platinum price remains below US$1,000 per ounce, many investors are hopeful about platinum’s prospects within the precious metals market, and they are keen to learn how to invest in platinum. 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. It accounts for 75 percent of world production and holds the largest-known reserves of platinum-group metals. In 2019, the country produced 130,000 ounces of the precious metal, down slightly from 137,000 ounces the previous year.
Production fluctuations from the world’s top platinum-producing country have been a common trend over the years. The World Platinum Investment Council (WPIC) predicted a 5 percent surge in demand during 2019 due to an increase in investor interest; however, that demand growth ultimately did not result in a significant increase in the price of platinum thanks to a supply surplus heading into the year.
On the demand side, the WPIC predicts that industrial platinum demand will increase 2 percent in 2020, which will hopefully offset the prediction that demand in China will slump below 1 million ounces for the year, as well as a forecasted dip in global jewelry demand.
The automotive industry remains the world’s largest consumer of platinum; the sector uses the metal as a catalytic converter for vehicle exhaust systems. Although a decline in demand from the automotive space is expected, it is forecast to be roughly the same as last year; demand should only fall by 3 percent year-on-year to 2,860 ounces of platinum.
The fall is partly attributable to a decline in market share for diesel passenger cars in Western Europe.
Platinum investing: How to invest in platinum
Investors who believe the above market dynamics will eventually result in the platinum price rising even more may be interested in investing in the metal. There are several ways to invest in platinum, with the first being to purchase physical platinum bars or platinum bullion coins directly as a way to expand one’s portfolio. Such purchases can be made through a bullion dealer.
Another investment option is the WPIC and BullionVault’s online physical platinum market, which is open 24 hours a day, seven days a week. It 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 a sound 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). The benefit of investing in a flourishing mining company is that they have a higher chance of not being negatively affected by a dwindling platinum spot price.
This is an updated version of an article first published by the Investing News Network in 2017.
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Securities Disclosure: I, Nicole Rashotte, hold no direct investment interest in any company mentioned in this article.