How to invest in platinum

What is platinum and what is it used for?

Platinum is a silvery-white metal that is mined primarily in South Africa and Russia. Compared to some other precious metals, such as gold, it is more difficult to mine, and it is rarer due to its scarce supply. Platinum is one of the four major precious metals, but it also has many industrial purposes.

According to the World Platinum Investment Council, the main sources of platinum demand are the following:

• Automotive applications: Platinum is widely used in catalytic converters to reduce harmful emissions from vehicles. It helps convert harmful gases like carbon monoxide, nitrogen oxides and hydrocarbons into less harmful substances.
• Jewelry: Due to platinum’s rarity, durability and purity, it is a popular metal used in jewelry. Most of the jewelry demand comes from China, accounting for 41%.
• Electrical and electronics: Platinum is used in the production of electrodes, spark plugs and electrical contacts. Its high electrical conductivity and resistance to corrosion make it suitable for these applications.
• Chemical industry: Platinum is used as a catalyst in various chemical reactions. It plays a crucial role in processes such as petroleum refining, nitric acid production and hydrogenation reactions.
• Medical applications: Platinum-based drugs, such as cisplatin, are used in chemotherapy to treat certain types of cancer. It is also used in medical devices like pacemakers and dental equipment.
• Investment: Investment in financial products backed by platinum along with platinum bars and coins is the smallest segment of platinum’s demand.

Factors that impact platinum prices

The platinum market is relatively small compared to silver and gold, and therefore prices can fluctuate more dramatically. Since platinum is a highly industrial metal, it is more responsive to supply and demand fundamentals, whereas gold, for example, can be sensitive to investor sentiment. During periods of economic stability and growth, platinum prices tend to increase as demand increases during these times.

Political stability can also affect platinum prices. As South Africa and Russia mine the majority of platinum, if there is political unrest in these countries, supply can be impacted, which can impact the price.

As the largest source of demand, the auto industry also plays a role in platinum prices. Aside from being used in auto catalysts to reduce emissions in diesel and gasoline automobiles, platinum also has a role in the ‘hydrogen economy’, the shift to replace fossil fuels with hydrogen as a primary energy source. The metal is used in electroliers to make hydrogen and fuel cells, which power cars, trains and ships. The Fuel Cell Market, which was valued over $6.75 billion in 2023, is expected to experience a compound annual growth rate (CAGR) of 10.9% from 2024 to 2032.

Pros and cons of investing in platinum

Like any investment, platinum has its own unique set of pros and cons. Here are some you may want to consider:

Pros

• Hedge against inflation: Platinum has historically served as a hedge against inflation. As the value of paper currency declines, the price of precious metals like platinum tends to rise.
• Industrial demand: Platinum is widely used in various industries, including automotive, jewelry and electronics. The increasing demand for platinum in these sectors can drive up its price over time.
• Diversification: Adding platinum to your investment portfolio can provide diversification, reducing overall risk. Since platinum has a low correlation with other asset classes like stocks and bonds, it can help offset losses during market downturns.

Cons

• Volatility: Factors such as economic conditions, geopolitical events and mining supply can significantly impact the price of platinum. Investors should be prepared for potential fluctuations in the platinum market.
• Limited investment options: Compared to other precious metals like gold and silver, the investment options for platinum are relatively limited. Platinum bullion and coins are less readily available, and platinum exchange-traded funds (ETFs) have lower liquidity. This limited availability can make it more challenging to buy and sell platinum investments.
• High entry barrier: Investing in platinum typically requires a significant upfront investment. The cost of purchasing physical platinum, such as bars or coins, can be substantial. This high entry barrier may deter some investors who have a limited budget.

How to invest in platinum

Being a versatile metal, platinum presents many investment opportunities. There are many ways in that you can invest in platinum, each of which having risks involved. It is important to only invest in financial products that match your knowledge and experience and are suitable for your investment plan. Below are some common ways to invest in platinum:

• Bullion: One way to invest in platinum is to physically buy it. For example, you can purchase platinum in the form of bullion, coins or jewelry.
• Stocks: Another way to invest in platinum is through platinum mining stocks. Examples are Sibanye-Stillwater, Anglo American Platinum and Impala Platinum.
• ETFs: There are also many platinum ETFs available. Investing platinum ETFs gives you broad exposure to the industry in a single product. Examples are WisdomTree Physical Platinum, Xtrackers Physical Platinum and ZKB Platinum.
• Futures: Additionally, you can invest in platinum futures. Futures are complex instruments and can have a high risk of losing your investment or even more.

Investing in platinum ETCs

Investing in platinum exchange-traded commodities (ETCs) can be a way to gain exposure to the price movements of platinum without holding physical platinum. ETCs are investment products that are traded on stock exchanges, similar to stocks. They are designed to track the price of the underlying commodity, in this case, platinum.

Here are some platinum ETCs we offer on our platform:

Note: Some ETFs may not be available on our platform for your country (temporarily) due to regulatory reasons.