Is Platinum a Good Investment?

Platinum is growing in popularity, so you might be asking: Is platinum a good investment? In recent years, platinum has sidled up to gold and silver as an investment choice because of its exclusivity. 

The earth’s platinum deposits are believed to be just one-eighth the amount of unmined gold, which is out-mined by gold by about 30 to 1. Because platinum is rarer than gold and has more industrial uses, some investors may see the discount on gold as a time to invest in platinum. 

If you’re asking, “Is platinum a good investment?” here’s more discussion to help you decide.

Historical Performance of Platinum

Unlike gold, platinum doesn’t have a history dating back to ancient times. Antonio de Ulloa discovered Platinum in South America in 1735, although pre-Columbian natives had used it before.

Accurate price data dates to 1969, when an ounce of platinum sold for $230. It later spiked to $960 per ounce in 1980. About 70% of the world’s platinum comes from mines in northern South Africa and labor strikes that year led to a shortage, driving up the price of platinum.

Platinum prices dropped back and hovered between $350 and $450 per ounce until 1999, when they started climbing and reached an all-time high of $2,180 in February 2008. 

When the global financial crisis struck that year, gold prices rose, but platinum prices sank. More sensitive to market influences than gold, platinum has risen to more than $1,200 per ounce since. Still, it slumped back and fluctuated with the volatility of industrial demand and mining disruptions.

Types of Platinum Investments

Your first question about platinum might be: “Is platinum a good investment?” If you decide it is, you might want to know how to invest in platinum. Your platinum investment could take many forms. Here are platinum investments you can consider.

• Platinum bullion: Tangible bars, coins or ingots
• Exchange-traded funds: Instruments backed by the metal
• Mining stocks: Shares of platinum mining companies
• Platinum futures: Agreeing to buy at a set price at a future date

From owning physical platinum to a more hands-off approach with platinum ETFs, you have several ways to invest in platinum.

Pros of Investing in Platinum

Few people think beyond gold and silver when it comes to investing in precious metals. However, platinum provides a unique opportunity for investors. 

The demand for platinum is expected to continue outstripping supply, supporting higher prices. Because it has little to no correlation to equity markets, you might find investing in platinum to diversify your investment portfolio and hedge against inflation attractive.

Consider these pros for investing in platinum:

• High intrinsic value
• Demand stability
• Portfolio diversification
• Potential high returns
• Long-term investment

Platinum is considered a good addition to an investment portfolio because of its importance in meeting the challenges of the 21st century. Demand growth is expected to come from various technologies, including decarbonizing transportation and supplying portable and emergency power backup.

Cons of Investing in Platinum

Investing in platinum has potential downsides. The platinum market is volatile and historically marked by huge price swings, making it unsuitable for investors with a low risk tolerance. 

Platinum also tends to be more illiquid than gold and silver. With smaller platinum markets, finding platinum products to buy and sell can be a challenge. When buying and selling, you may experience long waits to order products and pay more or receive less with wider spreads.

Here are the potential cons of investing in platinum:

• Price volatility
• Low liquidity
• Market sensitivity
• Cost per ounce
• Storage costs 

Investing in physical platinum can be particularly challenging for investors. Per ounce, platinum typically costs more than gold and is often sold at a premium. This can make a platinum investment less accessible to investors. On top of those higher costs, you must also pay for proper storage of physical platinum and insurance.

Supply and demand, technology and the influence of the industrial market make it hard to target income from short-term gains with platinum's already volatile nature, leaving you to rely on a long-term strategy to witness potential returns.

Points to Consider When Investing in Platinum

With its silver-white sheen, platinum is physically good-looking. It can also be attractive to investors because of its rarity, industrial demand (from the automotive industry to health care) and potential for price appreciation and portfolio diversification. However, investors must be aware of the potential downsides of price volatility, market shifts and geopolitics.

About 70% of the world’s platinum is supplied by South Africa and Russia is the next largest supplier. The concentrated sources of supply, heavy reliance on the industrial market – particularly the auto industry – and the potential for supply disruptions because of geopolitics can lead to sharp swings in the price of platinum, even with small changes in supply and demand.

The price of platinum tends to be more volatile than that of gold or silver. Because of the potential price swings, it may be a good idea to invest in platinum with a clear exit plan – selling when platinum hits a certain price, when you reach a percentage gain or when you believe demand is about to shift. 

If it is less than a year, holding the precious metal for a shorter term also presents tax implications for short-term capital gains.

Consider investing in platinum to diversify your investment portfolio and other precious metals instead of relying solely on platinum.

Determine Whether Investing in Platinum Fits Your Goals

There is no short, straightforward answer when you ask if platinum is a good investment. You must do your due diligence and find out whether investing in platinum fits your financial situation, investment strategies and goals. 

Adding platinum to your investment portfolio can provide diversity and hedge against inflation. There is potential for returns if you hold platinum long-term, but you must keep an eye on the volatility of platinum’s price and the many factors that influence it.

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