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.
Generally, when demand for a metal is high and supply is low, its price will rise. However, for platinum, that has not been the case — in the last five years, the platinum price has fallen about 40 percent.
Nevertheless, many investors remain 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 globally.
However, the nation experienced a reduction in platinum output last year as a result of mine closures in 2017. Production fluctuations by the world’s top platinum-producing country have been a common trend over the years. According to the World Platinum Investment Council (WPIC), platinum supply will slip to 7.91 million ounces this year, with notable declines in South Africa, Zimbabwe and Russia.
On the demand side, platinum demand is expected to increase to 7,740 ounces thanks to a substantial rise in investment demand, which offsets weaker forecasts surrounding the automotive industry, industrial segments and other platinum products such as jewelry.
Despite this, 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 slower than last year, as it should only fall by 3 percent year-on-year to 3,000 ounces of platinum in 2019, compared to a 7 percent decline in 2018.
The decrease is partly attributable to a stabilization of demand in light-duty diesel autocatalysts in India; however, healthy demand for platinum still remains.
Platinum investing: How to invest in platinum
Investors who believe the above market dynamics will eventually result in a price rise for platinum 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 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 like the ETFS Physical Platinum Shares (ARCA:PPLT) are also an 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).
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.