An Introduction to Platinum Investment
When contemplating precious metal investments, it would be easy to overlook platinum in favour of more recognised metals such as gold and silver. Like gold, platinum plays an important role in both industry and as a precious metal, yet the demand for each metal is very different. For gold, each year, around 75% of the world’s supply is used in coins, bars and jewellery. However, for platinum, nearly 65% of the world’s supply is destined for industrial or automotive use. This means that the price of platinum is heavily reliant on industrial demand.
Platinum is also very hard to come by. As you can imagine, mining for gold can be a time-consuming process — but it’s a lot harder if you’re looking for platinum! This is because platinum is one of the rarest metals on earth, and is actually around 30 times rarer than gold. While gold has been discovered on every continent except Antarctica, according to the World Platinum Council, there are only four countries in the world that have platinum mining operations of any significance.
Of these counties, South Africa has the largest platinum resources, with over 80% of the world’s reserves. This rarity means that all of the platinum which has ever been mined would only cover your ankles in one Olympic-sized swimming pool. In comparison, many suggest that all the gold ever mined would fill three Olympic-sized pools.
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The Many Practical Uses of Platinum
Platinum has a multitude of industrial uses, which means that although it is very rare, it remains in high demand from certain industries. The automotive industries rely heavily on platinum when producing catalytic converters for vehicle exhausts. This is because the platinum is used in the exhaust system to remove harmful emissions, making them more environmentally friendly.
Platinum also has wide applications in the electronic, medical and biomedical sectors, including surgical instruments, and even form part of a treatment for certain cancers. Due to the versatility of this metal, industrial demand for platinum has increased nearly fourfold since 1980. However, where does this leave platinum as an investment option?
With such a wide range of industrial uses, the price of platinum is said to be driven foremost by industrial demand. However, when you look at a longer period, the price of platinum follows a similar correlation to that of the price of gold (the most actively traded precious metal) and copper (the most actively traded industrial metal).
Having said that, the price of platinum can be volatile, especially when measured over a shorter period of time, and many market commentators suggest that platinum is currently undervalued. Due in part to the impact of COVID-19 on the financial markets, towards the end of July 2020, gold breached the $2,000 USD per troy ounce mark for the first time. This large price increase was heralded as an all-time high for gold. In comparison, platinum, breached the $2,000 threshold back in May 2008, and came very close again in 2011.
However, the prices for platinum today are very different. Whilst at the start of January 2021, gold was still trading at nearly $2,000 USD an ounce, platinum was nearly half that value at just over $1,000. It has risen steadily since, and at the start of February 2021, the price of platinum surged to reach a six-year high. Although this appeared to be a noticeable increase, many pointed to the price disparity between platinum and palladium, as the industrial uses for both metals are somewhat linked. Similarly, optimism for an increase in industrial demand, coupled with stricter emission regulations in coming years lead some to speculate that the price of platinum will also continue to rise.
Much like silver, but unlike gold, purchases of platinum in any form will attract VAT of the standard rate, currently 20% in the United Kingdom. Although this could be seen as a barrier to entry for some, due to the large price movements of platinum, this 20% tax could be absorbed by some of the percentage gains which we see in the price. For example, from March 2020 to February 2021, the platinum price differed from a low of £509.45 per troy oz. to a high of £894.58 — an increase of nearly 76%. Even over much smaller periods of time, the price of platinum can vary significantly. November 2020 saw a low of £654.82 but by February 2021, we saw a high of £894.58 — an increase of nearly 37%.
You can invest in platinum in many of the same ways as other precious metals, meaning there are a wide range of options available, should you wish to diversify your portfolio with this precious metal. Many who are new to precious metal investments choose the convenience of DigiGold, which is available in gold, silver or platinum. This is a fully digital service, where you are able to register with The Royal Mint and fund your investment account with a debit card or bank transfer.
This will allow you the opportunity to buy and sell gold, silver or platinum at live market rates. One of the main advantages of DigiGold is the convenience of storage and insurance, as the metals are never delivered to you, but are stored safely at The Royal Mint. In addition, DigiGold is sold by value, not weight. This means that even with a modest investment of £25, you are able to begin investing in platinum.
Although this option is attractive to many, some investors prefer to take delivery of their precious metals and store them at home or at a storage location of their choice. Platinum is available in both coin or bar form, and can be purchased directly from The Royal Mint. Many of our popular bullion ranges, including the Britannia and Queen’s Beasts collection are available in platinum. Whilst most platinum coins are only available as a 1oz option, bars are available from 1oz to 1kg, which is an accessible way to purchase larger amounts.