How to Invest in Platinum: Tips & Strategies
By StoneX Bullion
Platinum is one of the most valuable precious metals, recognized for its extreme rarity and diverse range of industrial applications. Its high value, scarcity, and triple-threat features as a precious metal, industrial metal, and green metal make platinum an attractive investment option for anyone looking to diversify their portfolio.
In this guide, we explore everything you need to know before you invest in platinum, including:
- What platinum is
- How platinum is priced
- Factors that influence platinum’s price
- Different ways to invest in platinum
- Pros & cons of investing in platinum
- How to invest in platinum
- Tips & strategies for platinum investors.
What is platinum?
Platinum is one of the world’s rarest precious metals, thirty times rarer than gold. It belongs to a group of platinum-group metals (PGM) that includes ruthenium, iridium, osmium, and palladium.
This precious metal is so rare that you could likely fit all of the platinum ever mined into your home. This rarity makes it an excellent investment option for people who want to diversify their portfolios with precious metals.
Around 90% of the world’s platinum is mined in South Africa. Russia produces about 8% with the remaining platinum coming from Zimbabwe, Canada, and Montana in the US. More than half of the world’s platinum production is used in the automotive industry.
What is platinum used for?
Platinum has more industrial and manufacturing uses than both gold and silver. Its durability makes it useful in a diverse range of industries, including automotive, medical, jewelry, technology, petroleum, and green energy.
Here’s how platinum is used in different industries:
- Jewelry: Platinum’s durability and shine make it an excellent choice of material in fine jewelry that’s worn on a daily basis. Its use in jewelry is especially popular in China, US, and India.
- Medications: Platinum has a wide use in the medical industry, used to make pacemakers and stents as well as in some cancer medications. It also has applications in treating Parkinson’s disease.
- Computers: Platinum alloys are used to coat computer hard drives.
- Green energy: More recently, platinum has been used in hydrogen fuel cell technology (also called green hydrogen) and electric power generation.
- Automotive: Platinum’s biggest industry use is in the automotive industry to make catalytic converters, which help reduce pollution generated from gas and diesel engines. As more companies move towards hybrid and electric vehicles, platinum’s use in the automotive industry is likely to increase.
How is platinum priced?
Like other precious metals, platinum is priced in US dollars per troy ounce (read more about what a troy ounce is in this article). GBP and euro are also used in settlement. Platinum’s price is set by the London Bullion Market Association (LBMA) and administered by the London Metal Exchange (LME).
When researching platinum prices you’ll find two different types:
- Spot price: This is platinum’s current market price, usually displayed ‘live’ and updated every few minutes to show how much you can buy and sell platinum bullion at that moment.
- Fixed price: This price is typically reserved for larger orders of platinum, based on an agreed-upon price by the London Metal Exchange.
What affects the price of platinum?
Before you decide to invest in platinum, it’s important to understand which factors can affect its price. Like some other metals, platinum can be volatile and experience significant fluctuations in price.
The major factors affecting platinum’s price are:
- South Africa: Because most of the world’s platinum is mined in South Africa, significant events can affect its spot price. This might include strikes in South African platinum mines or economic/political instability.
- Automotive industry: More than a third of platinum finds its way to the automotive industry. As a result, any significant changes to the automotive industry - such as people buying more or less cars - can affect platinum prices. If the auto industry is performing well, it’s likely that platinum prices will increase and vice versa.
- US dollar: In some cases when the US dollar decreases in value, it can have an effect on platinum’s price. For example, if the US dollar depreciates against the South African Rand, profit margins for platinum miners will drop. This can decrease global platinum supply and affect its price as a result.
- Investor demand: Like any other asset, platinum’s price can be influenced by investor demand. If more people are buying platinum, its price will generally increase. If investors are selling their platinum holdings, its price will plummet.
If you plan on investing in platinum, it’s helpful to monitor these factors to better predict upcoming movements in its price.
Different ways to invest in platinum
Like gold, silver, and other precious metals, there are a few different ways you can choose to invest in platinum. These include buying physical platinum bullion as well as ETFs and stocks. We outline each of these options below.
Buy physical platinum
Investing in physical platinum is, in our opinion, the best option. You can do this by purchasing platinum in the form of platinum coins and platinum bars. Like gold and silver, you can buy platinum bullion at various weights and price points to suit investors with all budgets.
Platinum bullion can be purchased from trusted precious metals dealers like StoneX Bullion. If you choose to buy physical platinum, consider the difference between bars and coins. In some cases, collectible coins such as the 1 oz Britannia Charles III platinum coin can offer more value beyond platinum’s spot price due to their rarity and historical significance.
Buy platinum ETFs
Platinum exchange-traded funds (ETFs) are a way to invest in platinum without owning the physical metal yourself. These work similarly to gold and silver ETFs. Essentially, you would be investing in platinum-backed securities.
The primary benefit of investing in platinum ETFs over the physical metal is that you’ll be pooling your funds with other investors, potentially offering greater exposure to the asset. On the other hand, you don’t own the actual metal yourself and miss out on the benefits of owning a tangible asset. Platinum ETFs can also involve added expenses like the funds’ management, administration, and marketing costs.
Buy platinum stocks
The third option is to invest in platinum stocks, which are shares in companies that mine, process, or use platinum. Like owning ETFs, buying platinum stocks allows investors an entry to the platinum market without having to buy and store physical platinum.
Platinum stocks are typically traded on stock exchanges, however it’s important to note that there are less platinum stocks than gold stocks. Some platinum mining companies might also work with other precious metals, so it’s essential to carefully research a company’s operations before investing.
Pros and cons of investing in platinum
Let’s look at some of the advantages and disadvantages of investing in platinum.
Pros of investing in platinum
Advantages of investing in platinum include:
- Portfolio diversification: Like other precious metals, platinum has low correlation with other asset classes like stocks and bonds. This makes it a good portfolio diversifier.
- Hedge against inflation: Platinum tends to hold value over time, making it an excellent inflation hedge.
- Industrial uses: Because platinum is an essential industrial metal, it’s likely to continue being in demand.
- Wealth preservation: Platinum’s rarity makes it a great way to preserve your wealth, and it’s likely to increase in value over time.
Cons of investing in platinum
Some potential drawbacks to investing in platinum include:
- Expensive price: Because platinum is rarer than other precious metals, its cost per troy ounce can be quite high.
- Higher costs: Depending on how much platinum you buy and where you intend to store it, the investment can come with extra costs including insurance and storage fees.
- No income: Unlike bonds and some stocks, physical platinum won’t generate income for its investors.
- Illiquid market: In some cases, the market for physical platinum can be illiquid. This can potentially make it difficult to buy or sell platinum.
Things to consider before investing in platinum
There are a few things every investor should think about before they start buying platinum. This ensures you get the most out of your investment. Below we’ve outlined a few considerations before you choose to invest in platinum.
Current market conditions
Before you buy platinum, look at the current market conditions and the factors outlined above that may affect platinum’s price. For example, you may want to research the current situation in South Africa, the automotive industry, and current platinum demand. This can help you determine if it’s a good time to buy platinum.
Different investment options
As outlined above, there are a few different ways you can invest in platinum. Consider each of these options carefully and evaluate their risks and costs. You may want to speak to a financial advisor to get personalized guidance on which option is most suitable for you.
Every investment demands a good risk management strategy and that includes platinum. Make sure to diversify your portfolio when investing in precious metals and, ideally, dedicate no more than 5-10% of your portfolio to these investments.
Take note of any extra fees that may be associated with buying, selling, and storing your platinum investments. These could be storage or insurance costs if you’re buying bullion, or brokerage and management costs if you’re choosing stocks or ETFs.
How to start investing in platinum
Ready to start investing in platinum? Below we outline how you can get started.
Step 1: Choose the type of platinum you want to invest in
Start by researching the different investment options including platinum coins, platinum bars, ETFs, or stocks. Understand the differences between these and consider how well they align with your investment goals, risk tolerance, and liquidity requirements.
Step 2: Find a reputable dealer or broker
If you’re buying physical platinum, be sure to choose a trusted online precious metals dealer that can guarantee the purity of its metals. It’s always best to go for an affiliate member of the London Bullion Market Association (LBMA) so you can be sure the dealer is reputable and reliable. If you’re going with ETFs or stocks, choose a broker with a good reputation.
Step 3: Keep an eye on your investments
Once you have your investments, keep an eye on your portfolio and monitor the platinum market carefully. Stay informed on the factors influencing platinum’s price so you can be prepared for price fluctuations and anything else that might affect the performance of your investments.
Tips & strategies for investing in platinum
To make the most out of your platinum investments, keep the below tips in mind:
- Diversify your portfolio: Avoid putting all your money in platinum. Try to invest in a range of different asset types to reduce risk and earn a more stable return on your investment.
- Consult an advisor: If you’re at all uncertain about which platinum investment is best for you, speak to a financial advisor. They can help you find the best investment strategy for your situation.
- Stay focused on the long-term: Like other precious metals, maintaining a long-term perspective is key. Prices can be volatile in the short-term but you’ll generally see value increase over a number of years.
- Keep an eye on the market: Never stop keeping up-to-date with the latest trends, industry news, and platinum price movements. This will all advise you on when is the best time to buy and sell platinum.
Start investing in platinum today
With its range of industrial uses and rarity in the world of precious metals, platinum makes an excellent investment opportunity. By now, you should have a strong understanding of how to invest in platinum and tips and strategies to make the most of your investment. If you’re ready to get started with platinum investing, StoneX Bullion is here to help you.
We stock high-quality and highly sought-after platinum coins and bars, including the 1 oz Tudor Beasts Bull of Clarence platinum coin and ever-popular platinum Canadian Maple Leaf. If you’d like to know more about the platinum investment opportunities we can present to you, don’t hesitate to get in touch with our team.