Platinum is widely used in a variety of sectors, and some market watchers believe it is a compelling investment. Here’s how to invest in platinum.
Platinum may be rare, but today it is the third-most-traded precious metal in the world. 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 moving forward, and 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 supply and demand
South Africa is by far the world’s top platinum-producing country. It accounts for 70 percent of world production, and holds the largest-known reserves of platinum-group metals globally.
The nation is expected to experience reduced platinum output in 2018 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. The World Platinum Investment Council (WPIC) notes that South African platinum production was up by 20 percent in 2017 compared to the 2016 forecast as a result of greater efficiency.
On the demand side, the automotive industry is the world’s largest consumer of platinum; the sector uses the metal 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.
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 do so, with the first being to purchase physical platinum bars or coins directly.
Such purchases can be made through a bullion dealer. One 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.
A third 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), Impala Platinum Holdings (JSE:IMP,OTCMKTS:IMPUY) 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, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.