Should I Invest in Platinum? Here’s What You Need To Know
Platinum is a rare metal often considered one of the most precious metals in the world. It is commonly used as an industrial metal but can also be used as an investment asset. Investing in platinum can be a profitable way to diversify your portfolio.
The long-term outlook for the market is generally positive, as the demand for platinum continues to rise due to its use in industry and jewelry.
The World Platinum Investment Council website has a wealth of information about all the aspects of platinum if you fancy a deep dive into this precious metal.
It’s important to remember that investing in any asset carries risks, so understand the potential rewards and losses before getting involved.
Platinum prices can be affected by global market conditions, supply and demand factors, political events, and other economic factors. Before investing in platinum, consider speaking to a financial advisor.
So, let’s answer the question, should I invest in platinum, by outlining all the factors you should know before making a decision.
What is Platinum, and What Are its Uses?
Platinum is a lustrous, grey-white metal prized for its beauty and durability. It is also rare; only a few hundred tonnes are produced yearly, mainly in South Africa and Russia. Platinum is a rare and valuable metal with a wide range of uses.
It is used in the jewelry and automotive industries for catalytic converters, laboratory equipment, and dental implants. Platinum is also used in cancer treatments, as it can be used to create drugs that target cancer cells.
This is a versatile metal with a wide range of uses and will continue to be valued for its beauty and utility in the years to come, and a great addition to any investment portfolio.
Check the platinum price today here.
How Does Platinum Compare to Other Precious Metals Investments Like Gold and Silver?
Gold and silver have historically been the most popular choices for precious metal investments. However, in recent years investing in platinum has emerged as a third option for investors looking to diversify their portfolios.
So how does platinum compare to its more traditional rivals? One key difference is that platinum is much rarer than gold and silver. This precious metal is around 30 times rarer than gold and has a limited supply.
This scarcity helps to drive up the price, which is currently hovering around $900 per ounce. Another key difference is that platinum is more chemically resistant than gold and silver. This makes it ideal for industrial applications, such as catalytic converters and fuel cells.
However, this precious metal can be volatile, and while it makes it suitable for short-term investing profits, it means you need to have a higher risk tolerance than gold investing.
What Factors Should You Consider Before Investing in Platinum?
Platinum is a popular choice for investment, but you should consider a few factors before diving in. First, it’s essential to understand the difference between physical platinum and paper platinum.
Physical platinum is the actual metal, while paper platinum represents a security that tracks the price of platinum without giving the investor actual ownership of the metal. Paper platinum may be less expensive and more liquid, but it comes with some risks – for example, if the company behind the security defaults, investors could lose all their money.
Another key factor to consider is where prices are headed. Platinum is a volatile commodity, and prices can swing wildly from one year to the next. If you’re considering investing in platinum, it’s essential to research and understand where prices will likely go. Finally, you’ll need to decide how you want to invest.
Several options are available, from mutual funds and ETFs to futures contracts and individual stocks. Each option has risks and rewards, so choosing an investment strategy that aligns with your financial goals is important.
Different Ways To Invest
Mutual Funds and Exchange-Traded Funds (ETFs)
Mutual funds and ETFs are popular choices for those who want to invest in this precious metal without the hassle of buying and storing the physical metal.
These funds track the price and offer instant diversification, as they may contain multiple platinum investments such as stocks, futures contracts, and other platinum-related securities.
Buy Platinum Bullion Coins and Bars
For those who want to own physical platinum, coins and bars are the most popular way to do so. Governments issue coins that typically feature a face value, while bars are usually issued by private mints and come in various sizes.
Physical platinum can be difficult to store, so it’s important to make sure you have an appropriate storage unit before buying any coins or bars.
Futures Contracts
Futures contracts are an agreement to buy or sell a certain amount of platinum at a predetermined price at a future date.
These contracts offer leverage, meaning that investors can control more significant amounts of metal than they could with physical platinum but come with higher risks due to the potential for substantial losses in a short period.
Individual Stocks
For those looking for more direct involvement, individual stocks offer another option. Buying shares of a company involved in the production or sale of platinum can provide investors with exposure to this precious metal without having to buy and store physical metal.
However, it’s essential to do your research when investing in individual stocks, as they come with their own unique risks.
Certificates of Deposit (CDs) or Bank Accounts with Precious Metals
Some banks and financial institutions offer accounts that allow investors to purchase platinum certificates of deposit (CDs) or add other precious metals such as gold, silver, and platinum to their bank accounts.
These can be easy for investors to access the metal without worrying about storage or security issues.
Pros and Cons of Investing in Platinum
Pros:
- Diversification into a valuable asset
- Suitable for short-term trading/speculation
- Rarity value
- Access to leverage and derivatives
- Easy access to physical platinum through coins and bars
- Opportunity to invest in individual stocks with exposure to the metal
- High industry demand
Cons:
- Volatile prices and a high risk of significant losses
- Relatively illiquid compared to other investments such as stocks or bonds
- Physical storage can be inconvenient, expensive, and a security risk
- Potential for manipulation in the markets by large institutional traders.
FAQs
Is it wise to invest in platinum?
Platinum performs more effectively if there’s good economic growth. When the manufacturing industry booms, platinum prices can increase too. So it is an excellent short-term investment that often has better and more immediate returns than gold.
Is platinum a better investment than gold?
It depends on your investment goals and risk tolerance. Both gold and platinum are precious metals with many of the same characteristics, but there are distinct differences between them that can make one a better choice than the other for some investors.
Platinum’s rarity and industrial applications make it a potentially more lucrative short-term investment than gold, while gold tends to be a safer, more stable investment over the long term. Ultimately, it’s up to each investor to determine which metal is right for them.
Are there any tax implications with investing in platinum?
Yes, like any other investment, taxes are associated with investing in platinum. Capital gains or other taxes apply depending on your situation and where you live. It’s essential to consult with a financial advisor or tax professional to ensure you understand the implications of any investment before committing funds.
Is physical platinum a better investment than futures contracts?
It depends on your individual objectives and risk tolerance. Futures contracts offer leverage but come with higher risks due to the potential for substantial losses in a short period.
Physical platinum offers an easy way to access the metal without worrying about storage or security issues, but liquidity can be lower than other investments, such as stocks or bonds. Ultimately, it’s up to each investor to determine which option is right for them.
Wrapping Up
So hopefully, I’ve answered your question: should I invest in platinum? You can now invest more confidently, knowing you have all the information to make an informed choice.
As you can see, platinum is a precious metal with various investment options, from mutual funds and ETFs to physical coins and bars. It can be an attractive option for diversifying their portfolios or speculating on the commodities markets.
