Platinum vs. Gold Investments

Investors have plenty of options when it comes to where to put their money, from stocks to bonds to ETFs to commodities, like gold. But one investment option that might not be on your radar is platinum — a precious metal that has a variety of uses.

There are several key differences between investing in gold and investing in platinum. Keep reading for more information on what determines gold and platinum prices, whether platinum or gold is the better investment for your needs, and the ins and outs of precious metals investing as a whole.

Gold vs. platinum compared

Although gold and platinum share some similarities, investors should be aware of how they differ when choosing between the two.

Liquidity

One crucial factor to consider when investing in any asset is its liquidity, or how easy that asset is to buy and sell. Gold is generally more liquid than platinum, as it’s traded in large quantities worldwide and has a well-established market. This allows investors to buy and sell gold quickly and easily.

Conversely, platinum has a significantly less liquid market, with less demand and more limited supply that accounts for a much smaller trading volume.

Volatility

Volatility, or how much a price fluctuates over time, is also a significant factor for investors to consider.

Platinum tends to be more volatile than gold, owing to its smaller market share and lower trade volume. While gold may experience smaller price swings, the popular precious metal can certainly still be volatile in the short term. Financial advisors tend to recommend focusing on long-term investing that aligns with your goals and timeline, since that will mitigate concerns you need to have about short-term price fluctuations.

Price differential

The price of platinum and the price of gold have varied widely at different points in time.

Historically, platinum has been more expensive than gold, but beginning in 2011, gold’s price started to surpass platinum’s. As of this writing in mid-May 2023, gold is trading at around $2000 per ounce while platinum is trading at closer to $1070, according to CME Group.

Keep in mind that other price factors also come into play when trading precious metals. For example, you may want to consult a tax expert to ensure you understand (and pay) applicable taxes.

Applications

Platinum is harder to mine than gold, and tends to be heavier and denser. Still, both precious metals have a variety of uses.

Platinum, for example, is used for catalytic converters — a car part that converts harmful toxins from the engine into less harmful substances to limit pollution into the air. (Because of this, factors such as the demand for internal combustion vehicles can influence the prices of platinum.) And gold, thanks to its high conductivity, is often used in electronics.

Both platinum and gold are also used extensively for jewelry making.

Investment characteristics of gold and platinum

Ultimately, the choice between gold and platinum will depend on your goals, risk tolerance and investment strategy.

Available investment products

There are a variety of investment products available for both gold and platinum. Some of the most common options include:

• Physical metal: The conventional approach to investing in gold or platinum is obtaining physical bars or coins through a precious metals exchange, which investors can keep in a secure facility, safety deposit box or safe. However, this option can entail extra storage and maintenance fees.

• Exchange-traded funds (ETFs): ETFs can give you exposure to these precious metals without having to physically hold them yourself. These funds are baskets of securities, meaning that you’re not just investing in one gold or platinum-related stock. This can help with diversifying your portfolio. For investors who already know how to buy stocks and have a brokerage service they work with, acquiring precious metal ETFs is relatively easy. Precious metals mutual funds are another option.

• Stocks: Investors can also buy individual stocks of companies that mine gold and platinum. But keep in mind that concentrating your investment into just one stock can be risky.

• Futures contracts: Futures contracts involve an agreement to purchase or sell a specific quantity of gold or platinum at a predetermined price on a future date. While this investment method has the potential for significant returns, there’s also the chance for significant losses. Futures trading is considered more speculative, and therefore unsuitable for inexperienced traders.

Storage

If you hold physical gold or platinum, you need to make sure to securely store it. While some investors prefer to keep their physical metal in a safe deposit box at a financial institution, others opt for storage in safes in their homes.

If you should decide to keep your precious metals at home, make sure you have adequate coverage in your homeowners insurance, and keep your precious metals in a secure location.

Ease of purchase

The ease with which you can buy gold or make a platinum investment depends on which method you use. One way is to purchase physical bullion — but that can also be time consuming and complex. You need to ensure you use a reputable dealer and arrange for secure storage.

If you’re interested in investing in gold coins, you need to make sure you determine the exact gold content to ensure you’re making an investment that is worth the asking price. Some types of gold, such as 10 karat, can be made with more than 50% of metal content other than gold.

If you want to go the gold or platinum ETF route, you can do so via a brokerage or investment app, similar to how you would trade stocks and bonds. You won’t possess an actual physical commodity, but you also won’t have to deal with storage — and there are many beginner-friendly options. You can also invest in gold or platinum-related stocks this way. Some investors choose to invest via gold investment companies that offer gold IRAs, but if you choose to do that, ensure that you understand all the associated rules.

Though it’s also possible to purchase gold or platinum options, it’s a complicated and risky method that’s only recommended for experienced investors.

Pros and cons of investing in gold

Gold has been used as a currency and an investment for centuries. It's generally considered a safe-haven asset investment because it historically holds its value or even increases during economic uncertainty.

As we mentioned above, gold is also a liquid asset, making it relatively easy to buy and sell. This can make it a more accessible investment compared to other assets like real estate. Another benefit of gold is that it can add diversification to your portfolio.

But there are cons, as well. Gold has no yield and doesn’t pay dividends, unlike financial assets like stocks and bonds. There’s also no guarantee that your price will go up in value.

Another downside to investing in gold is that its price can be volatile in the short term, which is why experts typically recommend you consider it a long-term investment.

How do taxes work with gold investments?

One option when investing in gold is to buy via a gold IRA, which can help you defer taxes on your investment gains until you withdraw the money in retirement. Doing so can give you many of the tax benefits of a conventional retirement account, but you have to make sure you understand all the IRS rules that apply to a gold IRA. You can also buy and sell gold-backed investments outside of an IRA.

Keep in mind that profits from trading securities like stocks and bonds are known as capital gains, and they’re subject to capital gains tax. But the IRS considers physical gold — including physical gold-backed ETFs — a collectible and taxes them differently.

Gains from physical gold are taxed as ordinary income if you own it for a year or less and a maximum 28% tax rate if you own it for longer than a year.

Pros and cons of investing in platinum

Platinum offers many of the same benefits as gold. The precious metal can act as a diversifier and safe haven when the economy is turbulent. As mentioned, platinum has a wide variety of industrial uses and is also used in jewelry.

However, there are also some drawbacks to investing in platinum. One concern is that its price tends to be more volatile than gold. There’s also less liquidity in the market, which could make platinum more difficult to buy and sell. The other cons associated with gold — like the fact that it doesn’t generate income and can be taxed at a higher rate than other investments — also apply to platinum investments.

Summary of platinum vs. gold

Gold and platinum are precious metals with a wide variety of uses, and each has its pros and cons as an investment option.

The choice between gold and platinum will depend on each investor's goals, risk tolerance and investment strategy.