The White Metal: PLATINUM

 

The White Metal: PLATINUM

Investors are well-acquainted with the allure of gold as a store of value, but there's another precious metal that often goes overlooked—platinum. Often described as "The White Metal," platinum is an extraordinary asset with unique investment potential. It's not only thirty times rarer than gold but also boasts compelling supply and demand dynamics that set it apart as a lucrative investment option.

Investment Merits of Platinum:-

Historically, precious metals have been an essential component of diversified portfolios, serving as both safe-haven assets and hedges against inflation. While gold is the traditional favorite in this category, platinum presents a compelling alternative. It has been proven to enhance the effectiveness of precious metal allocations in portfolios by offering long-term diversification benefits.

Remarkably, even a modest inclusion of platinum, as low as 5%, in a gold-focused portfolio over the three decades would yield superior risk-adjusted returns. The unique characteristics of platinum make it an invaluable addition to an investment portfolio.

Platinum's Unique Qualities:-

Platinum's distinctive physical properties set it apart from other precious metals. This dense, malleable, and ductile metal can be fashioned into intricate shapes without losing its durability. To put its remarkable malleability in perspective, one gram of platinum can be stretched into a wire over a mile long. At the same time, it weighs much heavier; a six-inch cube of platinum weighs as much as an average human being.

Platinum Demand:-

Approximately 75% of the world's platinum is mined in South Africa, with Russia being the second-largest producer. Canada, the U.S., and Zimbabwe also contribute to global platinum production, albeit in smaller quantities. Interestingly, platinum is often a by-product of nickel mining, making its supply even scarcer in comparison to gold.

Platinum's demand emanates from four key sectors:

1. Automotive: Platinum plays a crucial role in controlling harmful vehicle emissions through catalytic converters. Emerging market demand for automobiles, coupled with stricter global emission standards, ensures robust growth potential in this sector.
2.  Industrial: Platinum has a broad spectrum of industrial applications, from biomedical devices to glass fiber and jet engine blade manufacturing. Its growth is intrinsically tied to global economic development.
3. Jewelry: Platinum has firmly established itself as the premier jewelry metal, with significant demand in regions like India and China.
4. Investment: Investment avenues for platinum include ETFs, accumulation plans, and physical bullion like bars and coins. Notably, the World Platinum Investment Council (WPIC) actively promotes platinum as an investment asset, enhancing market efficiency and expanding distribution channels.

 

Factors Affecting Platinum Prices:-

Several factors influence platinum prices, including:

1. Diesel: The decline in diesel car demand impacts platinum due to its use in catalytic converters for diesel engines.
2. Trade Wars: Trade disputes can disrupt industrial demand for platinum, affecting its price.
3. Hydrogen Technology: Growing investments in hydrogen fuel cells, which require platinum, can boost demand.
4.  South African Issues: The precarious state of South African platinum mines can reduce supply, potentially raising prices.
5. Scarcity: Platinum's rarity, even compared to gold, suggests a long-term upward price trend.

 

How to Invest in Platinum:-

There are various ways to invest in platinum globally:

1. Physical Bullion and Coins: Investors can purchase platinum bullion and coins through banks and authorized dealers, ensuring high purity and quality.
2.  Futures Trading: Platinum futures contracts are available on commodity exchanges for more active traders, but they entail higher risk.

The Future of Platinum:-

Given its current price, investment potential, and diverse industrial applications, platinum presents an attractive opportunity. Recent years have witnessed platinum becoming more affordable relative to other precious metals, making it increasingly popular. The emerging trend of platinum jewelry in the West is likely to drive its demand even higher, including in India.

As platinum's price remains below historical averages, many investors are recognizing its value. With its scarcity and versatile utility, platinum could potentially shine even brighter in the world of investments.

Author

Ajit Singh

Founder

Graded Financial Services | Quick Turtle | AskCred

Management Consultant | Trainer