Platinum vs Gold Investment: Which Is The Best One For You?
Investing in precious metals can be a lucrative way to diversify your portfolio and protect against economic uncertainty. Platinum and gold are two of the most popular options for investing in this space, both of which have unique characteristics that make them attractive investments.
In this article, I will explore the differences between these two metals and help you decide which one could suit you better.
Platinum vs Gold Investment: How Do They Stack Up?
The History of These Precious Metals
Gold and platinum are two of the most sought-after precious metals in the world. They are also two of the most fascinating, with a long and complex history that spans cultures and continents.
Platinum was first discovered in South America over 300 years ago and was used by the indigenous people for jewelry and other decorative purposes and is now mined mainly from South Africa and Russia.
Gold has been cherished since ancient times for its beauty and durability. It is thought to have been first mined in Egypt around 3,000 BC. In the centuries that followed, both platinum and gold were used extensively in art and jewelry.
Nowadays, gold is mined from multiple locations, including Australia, China, Canada, and the United States. For this reason, gold is less likely to suffer from a supply issue and helps to keep the price more stable than platinum.
But it was only in the 18th century that these metals’ true value was realized and began to be used as currency. Today, they continue to be prized for their rarity and beauty.
They are also valued for their industrial applications, as they are used in various electronic and medical devices. As a result, these two metals will remain an important part of our world for many years.
Overview of Investment Potential
These are two of the most popular choices when it comes to investing in a precious metal. But what are these metals worth, and what are the best ways to invest in them?
The price difference between the two commodities is an inter-commodity spread. For example, gold may sometimes be traded at a higher price than platinum and vice versa.
Platinum is a rare metal used in various applications, from jewelry to catalytic converters. It is also a popular choice for investors, and although more volatile than gold, it has the potential for significant price appreciation.
According to the World Platinum Investment Council, platinum is thirty times rarer than gold.
That said, platinum can be more difficult to trade than gold, and industrial demand heavily influences its price. As such, platinum may not be suitable for all investors.
For example, before September 11th, platinum was often more valuable than gold. However, after the attacks, investors sought safety in gold, which has since been more expensive than platinum.
Check the current platinum price here.
On the other hand, investing in gold is a more traditional choice for investors, especially the ever-popular gold IRA investment route. It is highly liquid and relatively stable, making it easy to buy and sell. This precious metal also has universal appeal, as it is accepted as a form of currency worldwide via popular gold coins and bars.
However, gold prices can be affected by economic factors such as inflation, so it is essential to do your research before investing.
Check the current gold price here.
Both can be good choices for investors, but each has risks and rewards. By understanding these metals and how they behave in the marketplace, you can make informed decisions about which one may be right for you.
Comparing the Basics: Platinum vs Gold Investment
Price Point and Volatility Differences
The price of gold and platinum can vary significantly over time. Gold is generally more stable in terms of price point and volatility, while platinum tends to experience more significant fluctuations due to its higher rarity and industrial demand.
Liquidity Differences
Gold is highly liquid, making it relatively easy to buy and sell—platinum, on the other hand, maybe more difficult to trade due to its lower liquidity.
Investment Benefits
Gold and platinum have the potential for price appreciation over time and provide a hedge against economic and political instability.
Additionally, both metals can be used to diversify a portfolio. However, the risks associated with each should be carefully weighed before investing.
Storage Considerations for Precious Metals
Gold Storage:
Gold is relatively easy to store but should be kept securely. It can also be stored with a third party, such as a bank or bullion dealer.
Platinum Storage:
Platinum is slightly more difficult to store than gold, as it is more volatile and prone to tarnishing. It should also be kept in a secure location and may require additional insurance.
Tax Implications
Gold:
Gold is a popular investment for many reasons: it is durable, rare, and has a track record of maintaining its value over time. However, gold also comes with some tax implications that investors should be aware of.
First, gold is considered a “collectible” by the IRS and, as such, is subject to a higher capital gains tax rate than other investments.
Additionally, if you sell gold within one year of purchase, the profits will be considered “short-term capital gains” and will be taxed at your ordinary income tax rate.
Finally, if you inherit gold from someone else, you may be responsible for paying inheritance taxes on the assets.
Platinum:
Similar to gold, so here are a few things to keep in mind:
First, platinum is considered a “precious metal” by the IRS, which means it is subject to capital gains tax. However, there is a notable exception for “collectibles, ” including platinum coins and bars.
Your platinum investment will be taxed at a maximum rate of 28% (currently) rather than the usual rate.
Second, it’s important to remember that platinum can be a long-term investment. This means that you can take advantage of the “long-term capital gains” tax rate, which is currently 15%-20%. You must hold your platinum for at least one year to qualify for this rate.
Finally, remember that you can use losses on your precious metal investment to offset gains from other investments. This can be an effective way to reduce your overall tax bill.
Given these potential tax implications, consulting a financial advisor before investing is important.
Check out this excellent tax calculator from the Nerdwallet website.
Pros and Cons of Investing in Platinum and Gold
Gold:
Pros:
- Good hedge against economic and political uncertainty
- Stable price point and low volatility
- Easy to buy and sell due to high liquidity
Cons:
- Subject to higher capital gains taxes than other investments
- Potentially vulnerable to counterfeiting or theft if stored improperly
Platinum:
Pros:
- Good hedge against economic and political uncertainty
- Potential for price appreciation
- Diversification of portfolio
Cons:
- Low liquidity can make it challenging to buy and sell
- High volatility can lead to large losses if not properly managed
- Subject to higher capital gains taxes than other investments
Analyzing Your Investment Goals
It is important to consider your investment goals when deciding whether gold or platinum is right for you.
Platinum is generally suited to short-term investing, bringing more immediate gains due to its volatility, and performs better when the economy is growing. This suits investors with a higher tolerance for risk.
On the other hand, Gold tends to perform better during recessions and downturns, bringing more stability and, therefore, better for longer-term investments with less risk.
Wrapping Up
As you can see, deciding on a platinum vs gold investment really depends on your risk tolerance and personal investment goals, for example, short-term vs long-term.
By taking all these factors into account and doing your due diligence, you can make an informed decision on which metal is right for you and I hope this guide has given you the information needed for you to make a more informed decision.
Good luck with your investment, whichever of these two precious metals you decide to go with.
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