While gold and silver are undoubtedly the most popular precious metals for investors, platinum is more precious and definitely worth investing in. Platinum’s market dynamics are similar to those of gold and silver, but it is often overlooked because of its comparatively smaller trading volume. Its global market is also quite attractive, with the demand patterns showing a promising future.

Factors that determine the platinum prices

Demand from the auto industry

As nations become stricter on greenhouse gas emissions, platinum is increasingly being used in the auto industry. The metal is a core component of catalytic converters.  This, therefore, means that its demand is likely to rise progressively as environmental consciousness shapes the world.

Strengths of key currencies

Most of the world’s platinum comes from South Africa and Russia. Since international trade is primarily transacted in USD, the exchange rates among the dollar, the rand, and the ruble are critical in determining prices and demand. For example, a stronger dollar creates an incentive to buy platinum in the global market. Conversely, a weaker dollar reduces the purchasing power, leading to reduced supply and platinum price spikes.

Geo-political dynamics

Since more than three quarters of platinum comes from two countries, any unfavorable political occurrences in those countries may adversely affect the supply and prices of platinum. Specifically, factors such as trade tariffs or other barriers to entry in the key markets may adversely affect prices.

Main consumers of platinum

Auto-industry

About 36% of platinum is consumed by auto-makers, making them the single-largest market. The metal is used to make catalytic converters, which help turn toxic emissions into less harmful by-products.

Jewelry

Platinum’s aesthetic appeal makes it a highly valuable material for making luxury jewelry. It is estimated that jewelry makers consume 25% of the world’s platinum.

Industrial consumption

About a quarter of the world’s platinum is used in the industrial manufacture of medical equipment, electrical equipment, and a wide range of chemicals.

Investment asset

Platinum’s status as a high-value metal makes it an attractive asset for many investors. It is therefore offered in markets, where it can be owned in its physical state.

Investment options for platinum

Physical platinum

Considering its status as a precious metal, owning platinum in its physical state is comparable to owning gold. It can be easily liquidated and offers great financial stability. However, one should be careful not to be cheated out of their money because there are very few genuine sellers of platinum. Getting your bar of platinum or having it in the form of coins should give you peace of mind, knowing that it is a great way of storing wealth.

Platinum stocks

Platinum is traded in securities exchanges in countries where it is mined, such as South Africa. Typically, this involves buying from companies that have investments in the mining sector. The way to go about buying platinum stock is the same as buying any other security, meaning that you have to find a broker.

Platinum ETFs

This is a way of benefitting indirectly from platinum, based on the performance of companies involved in platinum trade and/or mining. Some companies backup their securities with physical platinum. With ETFs, you benefit from a diversified portfolio bought at a single purchase, thus minimizing your risk exposure.

Advantages of investing in platinum

  • Platinum has a promising prospect since its demand is expected to rise steadily as more countries demand the reduction of vehicular and industrial emissions.
  • Platinum’s high value makes it easy to liquidate, thus making it dependable as security.
  • Platinum is relatively stable and can be used to hedge against inflation.
  • It is not volatile, making it a safer investment than many assets.

Risks of investing in platinum

  • Due to its very high value, it is not easy to store in its physical state. Many investors have to hire third parties to ensure the safe storage of platinum. This leads to incurring additional costs.
  • Platinum’s spot price is quite high, which makes it relatively unstable.
  • The international trade in platinum is prone to cases of fraud, which makes it a complex and risky affair. One may have to conduct costly due diligence to land their hands on the product.

Bottom line

Investing in platinum can be a rewarding venture if you do it right. Platinum has a stable and dependable market, with a promising prospect heading into the future. It also offers investors various options of investing. However, the platinum market is a high-stakes market, where you can lose your money if you aren’t careful. You should therefore ensure that you only transact business with reputable firms and carry out adequate due diligence before immersing your money into platinum.