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.
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. In January, the platinum price hit a two year high before crashing to a 17 year low in March.
In the first quarter of 2021, the price of platinum managed to stay above US$1,000 per ounce, a clear sign that investor demand for the metal remains strong. 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 75 percent of world production. The country also holds the largest-known reserves of platinum-group metals. In 2020, South Africa produced 120,000 ounces of the precious metal, down from 133,000 ounces the previous year, due to COVID-19 lockdowns.
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, platinum supply hit a record deficit in 2020 after COVID-19-related mine closures and processing plant outages in South Africa cut new output by 18 percent.
On the demand side, the 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.
Last year, a fall in demand from the automotive, jewelry and industrial sectors was partially offset by higher investment demand. For 2021, the WPIC predicts that although investment demand may fall back as the world recovers from COVID-19, automotive platinum demand will rebound by 25 percent, contributing to an overall 3 percent increase in global platinum demand.
The automotive industry remains the world’s largest consumer of platinum; the sector uses the metal in catalytic converters for vehicle exhaust systems.
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 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 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). 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.
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Securities Disclosure: I, Melissa Pistilli, hold no direct investment interest in any company mentioned in this article.