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Platinum is among the rarest and most expensive precious metals, with an array of applications in fields ranging from automotive, dentistry, jewelry, and electronics. Because of its high value and scarcity, as well as acting as a hedge against inflation, some investors are drawn to the role it can play in portfolio diversification.
When it comes to platinum vs. gold, the former is rarer than the latter. It’s estimated that there are five billion ounces of gold above the ground. By contrast, there are only 200 million ounces of platinum. Additionally, gold is far more abundant in the Earth’s crust, with some 1,500 tons mined annually, whereas only 160 tons of platinum are mined each year.
The majority of platinum is found in five countries, with South Africa having the most reserves by far. Given its scarcity, platinum’s prices can fluctuate based on global supply and demand as well as the state of the economies in the countries where it’s sourced. However, compared to other metals, platinum prices have been less volatile in the recent past. For example, from September 2022 to September 2023, the price of titanium and lithium fell around 43% and 60%, respectively, while platinum gained nearly 2%.
In this guide, we discuss how to invest in platinum, the different types of investment options, factors to consider and various investment strategies.
Table of Contents
- Different types of platinum investments
- Pros and cons of investing in platinum
- Factors to consider when investing in platinum
- How to invest in platinum
- Tips and strategies for investing in platinum
- Platinum investment FAQs
- Summary of how to invest in platinum
Different types of platinum investments
Much like investing in gold and silver, you can choose from a few different platinum investment options. You can purchase platinum bullion, but there are also ways to gain exposure to the precious metal without buying it in its physical form, such as with exchange-traded funds (ETFs) or stocks.
Here are some options to consider.
Physical platinum is the most straightforward way to invest in platinum, but it involves extra considerations, including storage and insurance. Platinum — like gold and silver — can be purchased as bullion in the form of coins, bars, ingots and rounds. These physical assets are available from precious metal dealers and can be stored in safe deposit boxes or storage facilities.
Collectible platinum items, such as rare coins, may have additional value beyond the spot price of platinum due to their rarity and historical significance.
Platinum ETFs offer investors exposure to platinum without physically owning the metal. Much like gold ETFs and silver ETFs, these funds invest in platinum-backed securities, which could include physical platinum or stocks from platinum mining companies.
The principal benefits of investing in ETFs are twofold. First, by pooling funds with other investors, you’re able to gain greater exposure to the underlying asset. Second, by spreading your investment across multiple securities, you reduce your risk. Just be mindful that ETFs charge expense ratios, which entail the funds’ management, administrative and marketing costs.
Investors can also invest in platinum stocks, which are typically shares in companies that mine, process or use platinum. These stocks are typically traded on stock exchanges and — like platinum ETFs — offer investors exposure to the platinum market without owning physical platinum.
Keep in mind that there aren’t as many platinum stocks as there are gold stocks. Additionally, some platinum mining companies may not primarily focus on platinum, so make sure you review a company’s operations before investing in it.
Pros and cons of investing in platinum
- Can help diversity your portfolio
- Industrial demand (automotive, jewelry, electronics and more)
- Can be used as a hedge against inflation
- Wealth preservation
- More expensive than most other precious metals
- Has higher costs than other types of investments
- Doesn't generate income
- The market for physical metal can be illiquid
Like any asset, investing in platinum has its advantages and disadvantages. Platinum is often considered a diversification option for investment portfolios, as it has a low correlation with other asset classes, such as stocks and bonds. Like other precious metals, platinum tends to hold its value over time so it has historically been used as an inflation hedge.
Additionally, platinum is an essential industrial metal. Its limited availability can create imbalances in supply and demand, resulting in long-term price appreciation.
However, platinum may not be a suitable investment for everyone. Platinum is rarer than other precious metals, and its price can reflect that. Additionally, the physical platinum market can be relatively illiquid, meaning that investors may face challenges when buying or selling the metal.
Physical platinum investments can be expensive due to storage and insurance costs, and its cost per troy ounce is higher than all but three precious metals (gold, rhodium and palladium). Lastly, unlike some stocks, ETFs or bonds, physical platinum does not generate income, which can disadvantage income-seeking investors.
Factors to consider when investing in platinum
Before investing in platinum, consider the current market conditions, including geopolitical risks and economic indicators that may affect its price. Also, consider any supply and demand dynamics that may influence its price. For example, changes in the automotive industry or advancements in fuel cell technology could significantly impact platinum demand.
Consider the different investment options available and their individual risks and costs. If you’re unsure whether or not platinum is a wise investment for you, consult a financial advisor to analyze your investment goals and strategy before making a decision.
Developing a risk management strategy is essential for any investment, and platinum is no exception. Investors should consider diversifying their portfolios, setting stop-loss orders or working with a financial advisor to help manage their risk. Most financial advisors recommend dedicating no more than 5% to 10% of your portfolio to precious metals.
Costs and taxes
Investors should be aware of any fees associated with buying, selling and storing platinum products. You may face brokerage, management, insurance or storage costs. If you purchase platinum bullion, be aware that a dealer may charge more than the metal’s current spot price to cover costs and distribution. Additionally, taxes may vary depending on the type of investment.
How to invest in platinum
1. Research investment options
Before investing in platinum, research the various investment options available. Consider whether you want to buy the physical metal or gain exposure through ETFs or stocks. Understanding the differences between these options is important, as they have varying levels of risk, liquidity and fees.
2. Choose the right investment vehicle
Consider your investment goals, risk tolerance and liquidity requirements. Physical platinum is a popular choice for those drawn to holding the metal directly, but it can be more challenging to buy and sell. Platinum ETFs or stocks could be more convenient and may pay dividends, but ultimately, the type of investment you choose depends on your preferences.
3. Open an investment account
To invest in platinum, you must open an investment account with a brokerage or use an online trading platform. If you want to purchase physical platinum, you can find an online metal dealer that guarantees the purity of its metals. Choose a broker or dealer with a good reputation and low fees.
4. Monitor and manage your platinum investments
Review your portfolio regularly and make adjustments based on market conditions and investment goals. It’s also important to stay informed about the latest developments in the platinum market.
For investors holding the physical metal, ensure that your platinum bullion is stored in a reputable and secure facility to protect it from theft or damage.
When managing stock investments, monitor the financial health and production capabilities of the platinum mining companies. Stay vigilant about any company or industry-specific news and other factors that could affect the performance of your investments.
Tips and strategies for investing in platinum
Diversify your portfolio
Diversifying your portfolio by investing in numerous types of assets can help you reduce risk and achieve long-term growth. Diversification can protect your investments against market volatility and produce a more stable return on investment.
Consult a financial advisor
A financial advisor can help you evaluate your investment goals and risk tolerance. They can also help you develop a long-term investment strategy, given your financial situation.
When choosing a financial advisor, look for someone with experience in precious metals investing. They can provide valuable insights into the platinum market and guide your investment decisions. Consider choosing a fiduciary because they are legally bound to act in the best interest of their clients.
Keep a long-term perspective
It’s important to maintain a long-term perspective when investing in platinum. The precious metal’s prices can be volatile in the short term, but the metal has generally increased in value over the long term. This is evidenced by its gain from $81.86 per troy ounce in 1972 to its all-time high of $2,185 per troy ounce in 2008.
Stay informed about the latest market trends
To make informed investment decisions, stay up to date with the latest trends. This exercise may include following industry news, analyzing platinum price movements and monitoring supply and demand. This information will help you decide if and when to buy and sell platinum.
Platinum investment FAQs
What precious metals are safer to invest in?
Is investing in platinum a good option for retirement?
What are the risks associated with investing in platinum?
The market for physical platinum investments can also be less liquid than other investments, making buying and selling more difficult. The spot price of platinum is higher than almost all other precious metals. Additionally, investment costs such as commissions, expense ratios and storage fees can impact the return on your investment.
Keep in mind that investment vehicles — such as platinum ETFs or platinum mining stocks — may have varying tax implications. In some jurisdictions, dividends earned from platinum mining stocks may be taxed differently than capital gains from selling physical platinum or shares of ETFs.
Consult a financial professional to properly understand your investment's potential tax and cost implications.
What taxes and costs do I need to consider when investing in platinum?
When is the best time to sell my platinum investment?
Summary of how to invest in platinum
Investing in platinum offers a unique opportunity to diversify your portfolio. You can invest in physical platinum, ETFs and stocks. Physical platinum requires secure storage and involves additional costs, but stocks and ETFs provide exposure without having to own the physical metal.
Factors to consider when investing in platinum include market conditions, investment options and risk management strategies. Stay informed about market trends and diversify your portfolio to reduce risk. Consulting a financial advisor can help tailor your investment strategy to your financial situation and goals.
Investing in platinum carries risks such as price volatility, market illiquidity and investment costs. Additional costs, such as commissions, expense ratios and storage fees, should also be considered.
While platinum can be a suitable addition to a diversified portfolio, evaluating your financial situation and goals is essential before making any investment decisions.