Platinum belongs to precious metals and is scarcer than gold and silver, as the amount mined is much lesser than the other metals. The mines are majorly concentrated in South Africa, contributing to more than half of the world’s production.
This precious metal doesn’t corrode and is hard, making it a premium choice for engagement and wedding rings. Additionally, it is also used in manufacturing and electronics, especially in the automobile sector.
The metal can also be used to diversify your portfolio while considering the below-listed points before investing in platinum.
What Makes The Metal Volatile?
The metal finds considerable demand in the automotive catalyst segment, followed by the jewellery industry.
It is an industrial metal. Thus, the pricing is influenced by quantitative factors, namely the production and sale in the automobile sector, and other factors such as vehicle emission regulations. However, it may be noted that the American and the Japanese industries are diverted towards using recycled catalysts or palladium, which typically contributes to a lesser expenditure.
A Large Cartel
South Africa and Russia are the key producers of the metal, and this creates a possibility of having a cartel where the output and pricing may be decided collectively.
The estimated figures published by Statista say that South Africa significantly leads the production with an output of 130 metric tons in 2019, followed by 22 metric tons by Russia. The geographic concentration of the mines also leads to a fear of having an artificial rise in the price.
What Are The Ways of Investing?
Bars and Coins
You can purchase platinum in the form of bars or coins. The bars are available at a more competitive price, whereas the coins are easier to hold and trade. It is crucial to buy from recognised and renowned dealers for being sure about the metal’s purity.
In the case of a collective investment plan or scheme, it is essential to exercise due caution, as there exists a risk of default by the other parties. It is also necessary to have a complete understanding of the composition of charges and additional fees in the total pricing to avoid any type of hassles.
Exchange-Traded Fund (EFT)
It is another investment option, which is more liquid in nature, and helps to save on the storage and insurance cost. It is backed by physical metal or future contracts. The EFT is available in two variants, wherein it is structured as a grantor trust, or in the form of exchange-traded note (ETN).
Under the grantor trust, the fund is administered on the trust’s behalf, where the metal is held physically in a vault. However, the ETN is backed by future contracts, wherein the price of the metal is tracked and not physically held.
An investor may also consider purchasing the shares of a mining company as another mode of investment.
Investing in platinum makes your portfolio stronger and also serves as a hedging mechanism during inflation. The precious metal is also a profitable bet for investors who want to diversify their portfolios.