Precious metals have long been used as hedging tools against volatile economic conditions. While gold was at the forefront for a long time, platinum is now commanding investor’s attention. It offers various investment opportunities in jewelry, coins, bars, bullion, ETFs, and futures contracts.
Australian mines produce 15-20 times more gold than white metal, making it rare. Also, unlike its yellow counterpart, platinum has many industrial applications. This means limited supply and high demand. The result is visible. Let’s look at the reasons that make this metal a viable investment option.
Supply Constraints
About 70% of the world’s platinum comes from South Africa. Russia follows at a mere 12% and Zimbabwe by 8%. The remaining 10% is from other parts of the world. The commodity is so rare and concentrated, makes it is challenging to supply. The region is riddled with political unrest, labor disruptions, and discriminatory trade practices.
Demand
The precious metal has many industrial applications. About 41% of the world’s supply is used by the automotive industry, followed by 35% by the jewelry industry. 20% is used for industrial purposes, and only 4% goes to investment.
As interest rates ease, the demand for cars rises. Auto manufacturers in India and China increase their consumption of metal. The imbalance between demand and supply ensures that prices continue to hike.
Market Dynamics
The white metal has performed well when compared to other asset classes. With limited supply and increasing demand, there is only one way for the prices to move. You can expect short periods of corrections, but those are opportunities to enter at low levels. Overall, the long-term trend is bullish.
Multiple Investment Options
There is more than one way to invest in white metal. You can buy coins, bars, jewelry, futures contracts, invest in mining stocks, or invest in Platinum Equity Traded Funds (ETFs).
- Coins and bars are available in various denominations such as grams, ounces, and kilos. This gives you the flexibility to invest in as little as one gram or a kilo. If you want to minimize your risk, you can systematically buy small amounts of the metal. The result is that your purchase price is averaged over time.
- ETFs are more liquid than physical metal and do not require storage and insurance. They are easily traded on exchanges and are highly sensitive to price fluctuations. ETFs allow the prices of the metal to be compared to the top stock exchanges in the world.
- You can go big or small from a jewelry standpoint, depending on how much you want to invest. The best thing about buying jewelry is that you don’t have to keep it locked up until you are ready to sell. You can own the shiny metal and flaunt it too.
Many metals make for excellent investment opportunities, but platinum is the best among them. It is one of the rarest metals in the world and has many applications. The limited supply of metal makes it a more precious and lucrative investment. It also offers hedging opportunities against uncertain global economic conditions.
