Should Platinum be your next investment bet in 2022? All details you need to know!
Is Platinum your next investment bet in 2022? All details you need to know!
Although gold and silver receive a lot of attention, another precious metal is gaining popularity among investors: Platinum. Investing in Platinum is analogous to putting your money in gold or silver.
The usage of Platinum for investment objectives, on the other hand, is a relatively new trend. For thousands of years, silver and gold have been exchanged. By comparison, Platinum was only found in 1735.
Platinum is a flexible industrial metal with applications spanning manufacturing to health care and jewelry. According to the World Platinum Investment Council (WPIC), the car industry, which uses Platinum and other metals like palladium in catalytic converters, has accounted for about one-third of global demand in the last five years.
As Platinum is located deeper in the Earth’s core, it is rarer and more difficult to mine than gold. This combination of limited supply and high demand should result in a profitable investment, but Platinum is not for the faint of heart.
The bullion market for gold and silver is now much bigger in scope and scale.
This raises the question of which metal is the best to make an investment in.
Comparing Platinum to Other Metals
Copper is classified in a semi-precious metal category. Due to its immense availability, it has the lowest price in the group. Copper bullion has been kept in form of a source of wealth in the past. On the other hand, copper is mostly employed in the electronics industry and is best described by the term a base metal.
Silver is much less expensive than Platinum. It’s far more plentiful and has a wider spectrum of industrial applications. Silver has a similar hue to Platinum. However, it is slightly grayer than the bright color of pure Platinum. Platinum, like silver, does not tarnish or tone with time.
Palladium is a “sister metal” of Platinum, because it is a member of the Platinum Group Metals (PGMs). Palladium, unlike platinum and silver, has a limited jewelry market. Palladium’s price is like platinum is far more volatile than other precious metals.
Platinum vs. Gold
“Investing in platinum is no different than investing in gold, silver, or copper,” says Josh Simpson, a financial advisor at Lake Advisory Group. “Platinum differs from the others in that it is more rare.” According to the WPIC, Platinum is 30 times rarer than gold due to its low concentration in the Earth’s crust.
South Africa and Russia provide the most of platinum supplies. “Because so much of the supply comes from two countries, their political stability affects the metal price,” Simpson explains. “Their regimes are more stable, the lower the price.” According to him, Platinum is driven more by supply and demand than gold, which is impacted more by fear.
“Because Platinum is transacted in U.S. dollars, it has a lower supply when the dollar is weak,” according to Simpson. “A shortage of supply results in a price increase.”
Depending on what is going on globally, this, together with its compressed supply, are both pros and hazards to investing in Platinum.
For example, demand for Platinum soared in the fourth quarter of 2020 because the world economy began to recover from the epidemic. Meanwhile, a big South African factory was shut down, reducing platinum availability.
As a result, the price of Platinum increased in the third quarter while the price of gold fell – a pattern that continued into 2021 when the price of Platinum increased by more than 20% while the price of gold sank by 15%.
During the 2008 financial crisis, Platinum outperformed gold by 30 to 65 percent, outperforming gold by 30 to 65 percent.
History of Platinum
Platinum in form of a financial asset has a far shorter history than gold or silver, both known to ancient civilizations. Experts estimate that Platinum is 15–20 times rarer than gold based on yearly mine production. Platinum prices have been majorly lower than gold prices since 2014. South Africa mines more than 75% of the world’s Platinum.
Production of Platinum
Even when compared to other valuable metals, Platinum is quite rare. Annual new mine production is over five million troy ounces (160 t). On the other hand, gold mine production is over 82,000,000 troy ounces (2,600 t) per year, while silver production is at 547,000,000 troy ounces per year (17,000 t). Platinum, continuously trade at higher per-unit costs.
Platinum is traded on the New York Mercantile Exchange (NYMEX) and the London Platinum and Palladium Market. To be sold on most commodities markets, platinum ingots must be tested and hallmarked in the same way, gold and silver do.
Fluctuations in the price of Platinum
The price of Platinum fluctuates according to supply and demand; during periods of sustained economic stability and growth, the price of Platinum can be twice that of gold; despite that, during periods of economic uncertainty, the price of Platinum tends to fall below that of gold, partly due to higher gold prices. Due to supply issues, the price of Platinum hit a high of US$2,252 per troy ounce in March 2008. (brought about partly due to power delivery problems to South African mines). It fell to US$774 per troy ounce ($25/g) in November 2008.
The platinum spot price in New York on 15 October 2018 was $845.10, compared to $1,222 per ounce for gold and $15.16 per ounce for silver.
The code “XPT” is used for trading Platinum on the spot market. When making a payment in U.S. dollars, the code is “XPTUSD.” The price of other platinum group metals, notably palladium, rose majorly because the price of Platinum per ounce fell. Palladium costs over US$1600 per ounce in September 2019, but platinum costs around US$950.
Why did platinum prices fall?
When precious metals are used to rank anything, Platinum is traditionally at the top. Consider a platinum-selling record by an artist or a club or business that provides platinum-tier membership. Platinum always takes precedence over gold in certain situations.
However, this hasn’t been the Case for the last five years relating to metal pricing. Platinum has always been costlier than gold. So, what went wrong?
The rise of palladium in form of an important industrial metal eventually led to Platinum’s fall. We’ll go through this in more depth later.
Platinum’s price has dropped majorly from its highs of over $2,200 per ounce. The last time these levels were witnessed was in 2008. Even in late 2013, Platinum was often trading above $1,600 per ounce.
The metal was over double the price of gold at its peak in 2008, with the former selling at $2,069/ounce and the yellow metal at $925/ounce. Is Platinum a hot buy right now? Before digging deeper into the metal’s foundations, it’s important to understand what has made the metal less valuable and less expensive than gold.
Autocatalysts account for around 40% of the demand for grey-white metal. Autocatalysts are parts of a car’s exhaust system that act like a catalytic converter, turning risky emissions into innocuous CO2 and H20. Platinum is used in producing autocatalysts for diesel engines—trends in the car industry, specially the diesel vehicle market, impact platinum demand, and pricing.
Platinum’s recent decline probably be attributed to several causes. Platinum is now in great shortage. However, the stockpile is declining because of supply-chain interruptions induced by the new coronavirus. Developments in the Vehicle Business have been a headwind for Platinum. As fuel emission rules have become more strict, automakers have started to use more palladium.
Furthermore, Platinum has been affected by the major decline in the diesel car industry. For example, the aftermath of the Volkswagen diesel crisis has lowered demand for Platinum in diesel vehicles. Following the Volkswagen incident in 2015, when the firm faked emission testing in the United States, demand for diesel engines began to decline due to environmental concerns. As global pollution requirements tightened, multiple countries, including the E.U., began to reduce diesel car production.
The market share of diesel automobiles in the E.U. in the September quarter of 2020 was 29.4 percent; in the same quarter last year, it was 32 percent, and in the September quarter of 2018, it was 36.3 percent (Source: European Automobile Manufacturers Association). Diesel automobiles accounted for around 45 percent of total Auto Sales in the E.U. in 2017.
To understand why platinum prices have fallen, we must first explore what makes Platinum precious.
Platinum Has Important Industrial Uses
Platinum (Pt) is an highly rare metal found in the Earth’s crust. It’s tough — and expensive — to remove from the Earth. Platinum mining technologies did not come out until the mid-nineteenth century.
Platinum’s main application is in the care sector and these elements. Like its “sister metal” palladium (chemical symbol: Pd), Platinum is an important part of a car’s catalytic converter. It aids in converting your Vehicle’s exhaust emissions into less harmful gases. As society has become more ecologically sensitive, its position being an industrial metal has only grown more important.
Palladium Overtakes Platinum
Over the last decade, automakers found that using more palladium and less Platinum in catalytic converters proved even more effective. Only diesel-powered cars need the optimum platinum ratio of the past.
As a result, the two metals’ prices moved in different directions.
In the past, the platinum price to palladium price ratio was more prominent than 2:1. As a result, Platinum was usually nearly double the price of palladium. This connection entirely flipped when the car industry’s consumption went more in the latter’s direction. Palladium is at present more than double the price of Platinum.
DEMAND VS SUPPLY
Since 2013, demand for Platinum from autocatalyst manufacturers has fallen to 3,075 Koz in 2018 and 2,885 tonnes in 2019. According to the World Platinum Investment Council’s prediction, it will conclude the year at around 2,421 Koz, down 16 percent from the last year (WPIC).
Platinum jewelry demand has been declining on a yearly basis, lowering from over 3,000 Koz per year a few years ago to under 2,000 Koz. According to predictions, platinum jewelry consumption would amount to 1,826 Koz in 2020, down 13% yearly. Investors equally avoid platinum. While holdings in platinum-backed ETFs increased by 991 Koz in 2019, they are predicted to expand by 530 Koz in 2020.
However, there is one bright side in the golden story: Supply losses from pandemic-related mine closures and interruptions at the Anglo American Platinum Converter Plant in South Africa (in the third quarter) are expected to push the platinum market into a further deficit in 2020.
WPIC forecasted an 18% drop in total Platinum supply in 2020, to 6,738 Koz, following a 22% drop in refined output and a 10% drop in recycling supply in the September 2020 quarter predictions. According to the Council, the market deficit in 2020 would most probable to be approximately 1,202 Koz, up from 89 Koz in 2019.
Looking Ahead: Platinum Prices Are Rising Again
The platinum market’s downward correction looks to have concluded. Prices have grown by a whopping 100% from their lows. Platinum fell to a low of $600 per ounce before rising to $1,200 per ounce in 2021. This corresponds to the average platinum price for the last ten years ($1,177/oz).
Despite this, the price of Platinum is much lower than that of gold. To catch up with the yellow metal, it would have to rally another 50%. Here’s how it may bridge the gap in the years ahead.
Platinum Is in a Supply Deficit, Lifting Prices
The covid-19 epidemic severely hampered platinum mining operations. This was specially true in South Africa, the world’s leading producer of newly mined Platinum.
The global platinum market has suffered a supply shortage because mining has slowed. In other words, demand for Platinum is outstripping the precious metal’s supply. Demand for metal increased by 26% in the first quarter of 2021.
According to economics, when demand exceeds supply, pricing is increased.
Markets will be noting developments in the motor industry closely. The growing movement in the direction of electric vehicles (E.V.s) will surely influence Platinum and palladium in the future years. Platinum has shown potential being a catalyst for developing fuel cell technologies, so it’s not bad news. Accordingly, any major increase in electric vehicles and renewable energy technologies probably favor Platinum in the future.
Investing in Platinum
So there’s a Case to be made for investing in Platinum, but it’s not without its drawbacks.
“Platinum prices are far more erratic than gold and silver prices, so it’s not for the faint of heart or new investors,” adds Simpson. “Price fluctuations in both directions can be extreme in shorter investment periods of three to five years.”
Platinum’s price plunged by more than 60% between May and December 2008, after surging between 2007 and mid-2008, outperforming gold by 65 percent. In terms of price, it closed the year almost on par with gold.
Metals are a tactical play for us, which means you have to get the timing right, “Sensible Money, LLC’s founder and CEO, Dana Anspach, states. Normally, you’re betting on a short-term price change, potentially owing to an coming supply shortage, but how long will that shortage last?”
While making an investment in Platinum – or other costly metals, she argues – you must have a clear exit strategy. “Will you sell if the metal reaches a certain price, percentage gain, or if you believe market demand is shifting?”
According to Anspach, platinum may not be a long-term investment due to its price volatility; thus, it’s critical to think about the tax consequences of a short-term gain. Short-term gains from a one-year or less investment are taxed at regular income rates rather than long-term capital gains rates.
Tyler Landes of Tandem Financial Guidance, a fee-only financial planner, believes that betting on a particular commodity is probably too risky for the regular investor. He suggests more diverse options for platinum investors, like a larger natural resources fund, a hard asset fund, or even a precious metals fund.
The iShares MSCI Global Metals & Mining Producers ETF (ticker: PICK) is an exchange-traded fund that invests in entities that extract and produce metals. PICK is at present ranked No. 1 among equities precious metals ETFs by U.S. News & World Report. Anglo American Platinum, located in South Africa, is the world’s largest platinum producer and one of the fund’s assets.
Platinum prices are rebounding but stay historically low, making it an right time to add this alternative precious metal to your investment portfolio.
Indians have long been enchanted with precious stones and metals. However, while gold has grown in popularity in form of an independent asset class over the years, other metals have failed to capture the public’s attention beyond personal usage.
Platinum, which is more sensitive to the growing industrial cycle than gold, is in the same boat. The expensive metal is still seeking to impact the financial world, despite its limited availability and scarcity due to high power costs and a complicated extraction method.
Market analysts projects abnormally large movement in the grey-white metal prices shortly because the trend expands to the rest of the globe, platinum jewelry catches appeal in the West.
They believe it warrants a tactical, if not strategic, allocation in an individual’s portfolio and ranks it being the second-best investment bet among other metals. Here’s a handy guide to investing in this asset class and its possibilities.
For starters, like gold, platinum prices in India are calculated by adding import charges, octroi, and other local taxes to global prices. Prices are subject to global fluctuations, especially the rupee-to-dollar Exchange rate. As a result, even if platinum prices rise globally while everything else is persistent, an increase in the Indian rupee’s value vs. the U.S. dollar may result in platinum prices being unchanged domestically.
The massive supply-demand imbalance is what makes Platinum a viable investment option. Platinum production is only three million ounces globaly, less than a 10th of that of the yellow metal. There are four methods to make an investment in the global platinum market.
The most common form of platinum bullion bars. There are a few platinum coins available to pick from. The American Platinum Eagle and the Canadian Platinum Maple Leaf are two examples.
In India, though you only have two options: platinum bullion, coins, jewelry, or Commodities Exchange Futures trading. Bullion and coins can be purchased from diverse sources, including banks and authorized dealers. The metal, which has a purity of 99.95 percent, is usually available in 1 gram to 10 troy ounces.
“Because these are collectible works of art, they are sold at a premium over the spot price.” Furthermore, coins are difficult to counterfeit and need a little evaluation to establish their validity,” adds Ashish Kapur, CEO of the Delhi-based brokerage business Invest Shoppe.
If you’re buying a fresh coin, be sure it doesn’t have any dents or blemishes. On the other hand, forward trading in Platinum is fraught with risks because it necessitates immense sums of money. You may purchase a Platinum Futures Contract (1 gram) (MCX) on the Multi Commodity Exchange.
However, these contracts’ liquidity, rollover fees, and tracking faults must be considered. Only investors with a large sum of money and a primary grasp of futures trading should think about this option.
You may make an investment in Platinum by purchasing Exchange Traded Funds (ETFs) and Notes (ETNs). Although this product is not now available in India, it is always available on the foreign market. An Indian investor can make an investment up to $200,000 abroad, according to Reserve Bank of India (RBI) guidelines. The benefit of ETFs is that they allow you to own metal without storing real bars or coins.
An ETN, on the other hand, is issued by a bank and is valued using an index of many ETFs. “ETNs often track the performance of a set of platinum futures contracts. “It’s comparable to a bond, except it doesn’t pay interest,” Kapur adds. Besides pricing concerns, currency risk, specially rupee appreciation, occurs in such investments.
Platinum has gained popularity being an investment option in recent years, but portfolio managers advise that it should not account for more than 3-5 percent of your portfolio. Furthermore, platinum jewelry should not be purchased in an investment. Platinum jewelry has a lower resale value since it is not 100 percent pure, and the manufacturing costs are fairly high. “As an investment chance, Platinum is second only to gold, followed by diamonds and silver.
Gold’s appeal across millennia and even in the current economic crisis “clearly re-establishes the idea that gold is the ultimate contingency reserve,” according to Sudip Bandyopadhyay, managing director and CEO of Mumbai-based financial services business Convexity Solutions. According to him, overseas ETFs are the greatest method to make an investment in Platinum, while platinum bars and coins are the best alternatives on the local market.
Perfect for future
Platinum prices are expected to climb if demand expands slightly due to a global demand-supply mismatch and supply focused in a few countries like South Africa, Russia, and Canada. Due to its stronger beta to the global economic cycle, Devendra Nevgi, founder and main partner of Delta Global Partners, expects Platinum to perform better if the global economic recovery continues and a systemic sovereign crisis is avoided.
“Global risk aversion and the emerging scenario on the debt crisis will provide direction to platinum prices in the short run,” he believes. The autocatalyst industry accounts for around half of the demand for grey-white metal, with the remainder coming from industries like chemicals, electrical, glass, petroleum, and jewelry. “The buoyant demand for autos in China and India makes the platinum prognosis quite strong,” Nevgi adds.
Is Platinum a good investment
How much is an Ounce of platinum worth?
Like those of other precious metals, Platinum prices are usually stated in troy ounces. In addition to per troy oz, its pricing quotations are provided per gram and per kilo.
Most of the time, prices have fluctuated between $800 and $1,000 per ounce. The platinum price has occasionally strayed outside of this scope. The resale value of Platinum is affected by investor and consumer preferences.
You probably be wondering how to test Platinum for authenticity at home. The specific gravity test is the essential approach. This test may be performed using a scale and a few regular home objects.
On the other hand, Pure Platinum should not cling to a magnet. Only if it is alloyed with another metal, like nickel, can this happen.
Why prefer platinum rings over other white metals?
Platinum? Is it true that white gold exists? Palladium? It’s important to pick the right metal for an engagement or wedding ring, it is to pick the right diamond or design. It can have a major influence on the ring’s lifespan.
Do you want a ring that will be magnificent in 30 years? Most probably, you do. And did you know that Platinum is one of the few precious metals available that will keep gleaming and white in 30 – 50, or even 100 years?
Platinum rings are slightly more expensive than other white metals, but there’s a good reason. You spend extra for a more durable ring than other metals, one that you won’t have to maintain in the future, one that you can hand down for generations, and one that you won’t have to worry about.
If someone is seeking a white metal, we always recommend Platinum for multiple reasons. Here are a few lesser-known reasons why this metal should be properly considered:
1. A platinum ring will stay the same hue indefinitely.
When purchasing a ring, it’s difficult to think about the long term. Everything seems to be shiny and fresh when you’re at a store. But what about in 30 years, when your ring has gone through some regular wear and tear? How will your ring’s metal hold up?
Platinum is a naturally white metal that, unlike its nearest rival, does not need any future care to maintain its hue.
White gold, designed to match Platinum, begins to yellow with time. It needs constant care to retain the same hue, which you never have to worry about with Platinum. Platinum is indestructible and will never fade or change color.
2. It is a family heirloom that may be passed down through the generations.
Platinum, like other precious metals, will corrode with time. However, due to its lasting nature, Platinum is one of the most durable precious metals for a ring, and it will wear the best of any valuable metal.
When Platinum is scratched, just a little amount of the metal is lost. Slivers of metal are lost when gold is scratched, resulting in the rapid metal loss. Platinum keeps its volume and forms a warm patina finish with time, giving the ring character. The ring is hardened being a result of the metal displacement. The ring’s surface accumulates a lifetime’s worth of wear and memories, which would otherwise be lost.
The ring’s surface ultimately records a lifetime of wear and memories, making it right for passing along to loved ones. Platinum will age beautifully with regular cleaning and/or polishing.
Because Platinum is so rare than gold, it’s perfect for family heirlooms. It’s 30x rarer than gold! About 88 tons of Platinum are used to make jewelry each year, compared to 2,700 tons of gold. Platinum is precious and will retain its worth whole time due to its scarcity.
3. It will keep your diamond from yellowing.
Platinum is now known to be a naturally white metal. You’ll never have to worry about any unwanted color shining into the diamond because it’s a pure white tint that won’t fade with time. Yellow gold in real, and white gold that yellows over time, will reflect some yellowish tones into a diamond. Instead, the diamond’s brightness is improved by Platinum’s inherent white tone.
4. Platinum provides the safest diamond setting.
Because of Platinum’s strength and durability will defend any diamonds on the ring if you choose Platinum. A platinum ring’s prongs, which keep your diamonds in place, are stronger than those on a white or yellow gold band. Platinum, we all know, travels with force rather than breaking. Because gold is more fragile than Platinum, the odds of gold prongs breaking after frequent use are higher.
5. You will never break out, it is a result of it.
One of the lesser-known benefits of Platinum is that metal is hypoallergenic! What exactly does that mean? Because Platinum is a 90-95 percent pure metal, you may be quite certain about the composition of the ring you’re wearing. On the other side, white gold is majorly more prone to induce breakouts and allergic reactions. White gold is often alloyed with base metals like nickel, which can trigger allergic responses in some people. Because of its purity, platinum is an excellent choice for anybody with sensitive skin or allergies.
6. A platinum ring has a better quality feel to it.
This may be a corny sales pitch, but it’s real! When you wear Platinum, you can feel the difference. It’s one of the densest precious metals available. Platinum is 60 percent heavier than 14K gold and 40 percent heavier than 18K gold, with a six-inch cube weighing 165 pounds! When you hold a platinum ring in your hands, you notice a conspicuous difference. It just has a denser, higher-quality, and longer-lasting feel about it.
Is Platinum a good investment?
Before you engage in the metals market, keep in mind that Platinum is a volatile asset. Whether or not to make an investment in Platinum, like with any other asset, is a personal decision.
“Do your homework and consult with a financial professional who will give you an honest assessment of either or not you should make an investment in platinum at this time to evaluate if platinum would be a smart investment for you,” Simpson advises. “Speak with a fiduciary whenever possible since they are legally and ethically obligated to put your wants and concerns ahead of their own.”
You don’t have to worry about them, suggesting you that Platinum is a good investment, to pad their bank account, because a fiduciary isn’t authorized to receive fees on the assets or things they provide.
“Commodity investing is not for everyone. It makes no difference either it’s precious metals or crops. If it is a good investment, it should be determined by the investor’s level of expertise, risk tolerance, financial situation, and time horizon,” according to Simpson. “Just because a coworker is involved in something, it doesn’t mean that it’s suitable for you.”