Platinum Trading In 2020: Is It A More Affordable Precious Metal Investment Than Gold?

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Investing in platinum offers a way to express a bullish view on global growth. At the same time,  many traders see platinum as a store of value and an insurance policy against dollar weakness. Here are three of the best specific reasons for investing in platinum:

  1. Bet on Industrial Growth
  2. Bet on Weak US Dollar
  3. Bet on Supply/Demand Imbalance

Read on to learn more about these reasons, or skip ahead to find out how and where you can get started trading platinum.

Betting on Industrial Growth

The auto industry is only one of many industries that use platinum in its products. Nearly one in five manufactured products uses platinum during some stage of the making of the final product.

Vehicle Assembly Line in Beilun, Ningbo
Vehicle Assembly Line in Beilun, Ningbo via Siyuwj on Wikimedia

As emerging market economies grow, demand for manufactured goods will grow as well. An investment in platinum is a way to bet on growth in global industry.

Are Platinum Investments a Hedge on Weak US Dollar?

Platinum is similar to many commodities in that it generally moves in an inverse relationship with the US dollar. This makes platinum investing a way to profit from the detrimental effects of a weak dollar.

Unrestrained spending by the United States government has produced large debts and deficits in the world’s biggest economy. The US government has an unlimited ability to print dollars to pay down this debt, and this can result in a significant loss of purchasing power. Investing in platinum and other hard assets protects traders from the erosion of wealth that occurs from a weak US dollar.

Speculating on Supply/Demand Imbalance

Platinum supplies are limited and concentrated in only a few countries. 

In recent years, in response to lower prices, companies have shut down mines and lowered production.

Liv Shange Addresses Striking Mineworkers, Carletonville South Africa, via WASP SA on Wikimedia
Liv Shange Addresses Striking Mineworkers, Carletonville South Africa, via WASP SA on Wikimedia

There are many possible events that could lead to a spike in platinum prices:

  • Mining strikes in South Africa
  • Safety failures at mines
  • Increased consumer demand in developing nations
  • Higher global exhaust emission standards

In an industry where supply is already constrained, these imbalances could greatly increase platinum prices.

Should I Invest in Platinum?

The most compelling reason to invest in platinum is diversification. Most investment portfolios have an extreme concentration in stocks and bonds, and commodities provide a way to mitigate some of this risk.

Platinum also offers traders a way to profit from growth in the automotive industry and the industrial sector in general.

Emerging economies will continue to expand, and as they do so, their citizens will consume more manufactured goods.

Investing in platinum allows traders to capitalize on this trend without having to invest in local emerging country stock markets.

Investing in platinum allows traders to profit from a weak dollar as well as strength in consumer spending. Growth in large industrial economies such as the United States has often occurred at the expense of a strong currency. In fact, US policymakers have kept interest rates low to stimulate consumer borrowing and grow exports.

Investing in platinum, however, does have its risks:

  1. A slowdown in the auto sector or a global recession would almost certainly depress prices.
  2. The development of new automotive emissions-reducing technology could also sink prices.
  3. Significant Fed tightening and strength in the US dollar may lead to weaker platinum prices and weaker commodities in general.

How Can I Invest in Platinum?

Platinum traders have several ways to invest in the commodity:

Method of InvestingComplexity Rating (1 = easy, 5 = hard)Storage CostsExpiration DateManagement CostLeverageRegulated
Platinum Bullion1YESNONONONO

*Storage costs are passed on to traders in the form of management fees.

Platinum Bullion

Investors can buy platinum bullion bars and coins from metals dealers in the same way they can buy gold or silver bullion. In the United States, for example, traders can purchase American Platinum Eagle coins that have a purity of 99.95%.

Platinum bars are fabricated at foundries in different sizes including one ounce, ten ounces and 1 kilogram. Buying physical platinum requires storage units such as safety deposit boxes or secure safes.

Here are some online platinum bullion dealers you might consider:

Platinum Futures

The New York Mercantile Exchange (NYMEX), which is part of the Chicago Mercantile Exchange (CME), offers platinum futures contracts. These derivative products have the longest history among all metals products traded on the exchange.

Futures traders use leverage to buy contracts tied to the price of platinum. If prices decline, traders must put up additional margin to maintain positions. Investors must also either roll futures contracts forward each month or accept physical delivery. Investing in the futures market requires sophistication and active maintenance of positions by the trader.

Options buyers pay a price known as a premium to purchase contracts. An options call bet succeeds only if the price of platinum futures rises above the strike price by an amount greater than the premium paid for the contract. Therefore, options traders must be right about the size and timing of the move in platinum futures to profit from their trades.

Platinum Options

Platinum options are also a derivative instrument that trade on the NYMEX. Like futures, options have an expiration date. However, unlike futures, option bets succeed only if the price reaches the strike price by the expiration date. Options buyers pay a premium to the seller in exchange for the right to exercise the option in the future. Options traders must make correct determinations about the size and timing of platinum’s move in order to profit from their trades.

Platinum ETFs

These financial instruments trade as shares on exchanges in the same way that stocks do. There are several ways to invest in platinum using exchange-traded funds (ETFs). Below is a list of the most popular platinum ETFs:

ETFS Physical Platinum SharesiPath Dow Jones-UBS Platinum ETNSprott Physical Platinum and Palladium Trust

Shares of Mining Companies

There are many publicly traded companies that have some exposure to platinum prices.

While investing in companies can be a leveraged way to gain exposure to platinum prices, many of these companies have significant exposure to other precious metals. In addition, factors such as company management and the overall stock market can also affect these investments:

 Current PriceOverviewListings
Anglo American Platinum
The world's largest primary producer of platinumJohannesburg (JSE)
Impala Platinum
A leading producer of platinum and associated platinum group metalsJohannesburg (JSE)
London (LSE)
A British producer of platinum group metalsJohannesburg (JSE)
London (LSE)
Norilsk Nickel
Russian nickel and palladium mining and smelting companyLondon (LSE)
Moscow (MCX)
Sibanye Stillwater
The third largest producer platinumJohannesburg (JSE)
New York (NYSE)

Platinum CFDs

One way to invest in platinum is through the use of a contract for difference (CFD) derivative instrument. CFDs allow traders to speculate on the price of platinum without purchasing bullion, ETFs, futures, options or mining shares.

The value of a CFD is the difference between the price of platinum at the time of purchase and the current price. As platinum prices increase, the value of the CFD increases, and as platinum prices decline, the value of the CFD declines.

Many regulated brokers worldwide offer platinum CFDs. Customers deposit funds with the broker, which serves as a margin. The advantage of CFDs is that traders can have exposure to platinum without purchasing or storing bullion or having to manage complex futures or options positions.

Where Can You Trade Platinum?

If you are looking to get started trading platinum and other precious metal commodities, here’s a list of regulated options available in to consider.

Top Platinum Brokers Available in

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CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 73.90%-89.00% of retail investor accounts lose money when trading CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

What Do the Experts Think About Platinum?

Some experts see platinum investing as an alternative investment to gold. John LaForge, head of real-asset strategy at Wells Fargo, believes that platinum prices represent a more affordable way than gold to invest in precious metals.

Another leading expert sees favorable long-term fundamentals, including increased use of platinum in industrial applications and constrained supplies, as reasons for bullishness:

Simona Gamarini

In particular, auto sales in Europe have been growing strongly, and so far there is no sign that the political uncertainty there is having any impact on consumption. What’s more, underinvestment and reserve depletion in South Africa will continue to constrain any growth in output.

Capital Economics commodities expert Simona Gamborini

One expert, however, is less optimistic and believes the increased use of palladium in catalytic converters is curtailing demand for platinum:

Diverging demand expectations for platinum group metals [are] creating a price parity for palladium and platinum not seen since 2001. Palladium is benefitting from its inclusion in catalytic converters in gasoline-powered vehicles.

Commodities broker SP Angel

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