Investments in Platinum

Platinum is a rare metal found in the world, as compared to its peers like gold and silver. It has multiple uses in jewelry making. It is also an essentially crucial element and more than half of the platinum produced is used in the manufacture of automotives as it is the principal component in the auto catalysts by which vehicle-exhaust emissions of hydro carbons, carbon monoxide, nitrogen oxide, etc. are controlled. There are new environmental norms that have to be adhered to, in nations like China and India, where atmospheric air- pollution is a major issue.

Platinum is also used in the glass industry and it even finds a prominent place in the electrical sector as well as in the chemical industry. With its manifold uses, it is to be expected that there are infinite fields of this metal in many countries of the world. But in reality, platinum mines are prominently found only in South Africa and Russia and these two countries are the major suppliers of this scarce metal in the whole world. Therefore, Platinum has a tendency to trade at higher price per unit of the metal.

  • Investments in Platinum can be in the form of ‘Platinum accounts’ in many of the Swiss Banks. Here, similar to any foreign currency, this metal can be bought or sold any time; however, it does not imply owning of Platinum in the physical sense, but it means that the customer has a claim against the bank where he has done the above-mentioned transaction for the specific quantity of metal.
  • A second way of investing in the rare metal is by way of ‘Platinum – Coins investment’. The procedure for minting platinum coins is very intricate because of the difficulties involved in the working of the said coins as a result of its high cost. In the United States, many bullion investors buy the American Platinum Eagle coins that have been minted by the U.S. Mint.
  • On the London Stock Exchange, one can also trade Platinum as an Exchange Traded Fund or ETF, as it is commonly called. This method of buying or selling the shares involves lower transaction costs as compared to the same procedures (and insurance as well) when adopted in the case of the physical platinum metal. The following ETFs are available n the market:
  1. ETFS Physical Platinum Shares (PPLT): These ETFs are the largest, cheapest ETFs and also easily cash-convertible or quite liquid; whilst being physically backed by platinum bullion make them comparatively safer options for trading as compared to their below-mentioned peers
  2. iPath DJ-UBS Platinum ETN (PGM)
  3. E-TRACS UBS Long Platinum ETN (PTM)

In the latter two ETFs, there is tracking of future contracts. As a result, trading in these two ETFs could mean being exposed to credit-risks.

  • Another way of investing in Platinum is by way of Platinum bars. One can look for those bars that have been hallmarked for certification of weight and purity. Johnson-Matthey produces and refines such Platinum bars. Monex sells Platinum bullion in the form of such10-ounce bars are called Platinum Ingots, which have 0.9995 purity and they are used for the purpose of trade or as a means of storing or even for personal use.

It has been observed that during periods of stable economy, platinum commands a price much higher than gold; in fact, twice as much; but during phases of slowdown and financial crisis, the demand for this metal reduces because of the weak economic condition of the nations that require platinum in the auto- manufacturing and other processes. During such times, the gold prices surge high; many a time, rendering low the price of unit platinum.

A useful hedge when there is economic uncertainty, Platinum is considered as a hard asset which must feature in the recommended list of 9.5% hard assets in one’s portfolio.