Platinum is an enduring precious metal that is supported by both short and long-term demand drivers
While many investors today are familiar with the investment merits of owning gold, far fewer are aware of the strong investment case for platinum, a precious metal 30 times rarer than gold.
Why Invest in Platinum
Historically, it has been argued that investors should hold a percentage of precious metals in their portfolio to serve as both a “safe-haven” asset and a hedge against inflation. Clearly, gold is an excellent investment metal in this respect. However, many now refer to platinum as being similar to gold, but with stronger supply and demand fundamentals. Platinum has been shown to improve the effectiveness of precious metals allocations by acting as a long-term portfolio diversifier. It is significant to note that if investors in gold had included even 5% of platinum in their portfolios, their risk-adjusted returns would have been higher over the past 30 years.
Key recent platinum insights highlight why investing in platinum may suit the risk, portfolio or value requirements of both professional and retail investors.
Platinum’s unique credentials — precious, industrial and green — combined with the active promotion of jewellery and investment continue to drive growth in global demand in the face of constrained global supply. The platinum price is currently well below recent averages and remains at a steep discount to gold. Moreover, it is now easier for private investors to obtain platinum exposure through readily and easily accessible exchange traded funds (ETFs), fully backed by vaulted physical good delivery bars.
What is platinum?
Platinum is one of the rarest precious metals in the world. All the platinum ever produced would only cover your ankles in an Olympic-sized swimming pool. In contrast, all the gold ever produced would fill three such pools!
It has distinctive qualities that make it highly valued across a number of diverse demand segments. While platinum is best known for being the premier choice for fine jewellery, it is also a unique investment asset, and its remarkable physical and catalytic properties sees it used in myriad industrial applications.
Platinum is dense, malleable and ductile. It can be hammered or pressed into a shape without cracking or breaking, and stretched without losing its toughness. One gram of platinum can be stretched into a wire over a mile long! Moreover, it is heavy – a six-inch cube of platinum weighs as much as the average human being.
Why own platinum?
Platinum offers a unique investment opportunity, with strong merits to consider:
- Platinum has traditionally traded at a healthy premium to gold. There have only been four occasions during the last 40 years where platinum has been priced at a discount to gold for a sustained period. In all these cases, the price significantly recovered in the following years.
- Platinum’s precious underpin offers a low-risk entry for investors looking to buy into this investment asset.
- Platinum has a low correlation to the performance of traditional assets and performs well during periods of economic recovery. An allocation to platinum improves the risk-adjusted returns of a portfolio, including when gold is present.
- The widespread application of platinum in new technologies and in the development of future technologies and the associated demand growth is currently not reflected in its price.
Is It Good to Invest in Platinum?
There are a lot of reasons why platinum may be a good investment option. These include:
- It has a steady demand, irrespective of the speculative activity in investing. This is because there’s a steady demand in the automobile and jewelry industry.
- The limited supply of platinum in the world
- High prices for an ounce of platinum in both the industrial and investment markets
- Relatively mature market with diverse buyers from different industries
Since platinum is under the umbrella of precious metals, most investors would consider it safe storage of value to beat inflation.
Factoring legal and political risk, platinum is relatively stable compared to other precious metals.