BUY PLATINUM

platinum

Platinum has often been called Rich Man’s Gold. Platinum is significantly more rare than gold and historically has usually been more expensive. In fact, over the past 40 years, the price of platinum has averaged about 1.5 times the price of gold.

Platinum (Pt) is a heavy, soft and ductile metal. It is defined as a “noble metal”, meaning that it is nonreactive to chemicals, non-corrosive, and its integrity is not compromised by acids.

Platinum is most useful for its catalytic properties: it speeds up chemical reactions without itself changing in the process. Platinum’s catalytic properties were first discovered by German chemist Johann Wolfgang Döbereiner (1780–1849).

WHAT ARE THE USES OF PLATINUM?

Due to its catalyst properties, platinum its best known for its primary use as the active metal in catalytic converters in that it strips out the pollutants from car engine exhaust gases. Due to the recent high prices, a great deal of catalytic converter production now uses platinum’s sister metal on the elemental table: palladium. Platinum has also been tied more closely to diesel engines.

Because platinum is easy to form and mold and highly resistant to any corrosion, it is an ideal metal for jewelry. Unreactivity and durability also make it ideal for dental fillings and surgical tools. Platinum is also used in the electrical industry, in lasers, and in photography.

Unlike gold and silver, platinum is not historically money or a form of currency. Platinum is a relatively recent human discovery. It was first identified by the South American geologist Antonio de Ulloa in 1735. It does not have a history of money or royal decor. According to the World Platinum Council, about 3% of the demand for platinum has come from investment. For investment, platinum is minted and refined for investors in several popular forms all readily available through Midas Gold Group:

  • American Platinum Eagle
  • Canadian Platinum Maple Leaf
  • Vienna Platinum Philharmonic
  • PAMP Suisse Platinum Bars

WHY IS PLATINUM SO CHEAP?

Relative to the other precious metals, gold, silver, and palladium, platinum is historically cheap. Platinum price peaked at $2,243 per troy ounce in March 2008. Since 2008, it has significantly underperformed other precious metals.

12-year precious metals performance from March 2008 to 2020
Precious MetalMarch 2008March 2020Change
Gold$886$1,570+77%
Silver$16.90$17.90+6%
Platinum$2,243$965-57%
Palladium$439$2,405+448%

Since 2013, platinum has gone from having a supply deficit to a supply surplus (meaning more platinum is mined than consumed). The World Platinum Council projects annual consumption for 2020 to be 7,440,000 ounces per year with a projected supply of 8,110,000 ounces. Consumption has dropped as catalytic converter production has become more efficient, far fewer diesel engines are now produced, and platinum has been largely replaced with palladium at certain major auto manufacturers.

The World Platinum Council projects a small increase in demand in the coming years with a surprising projected increase in investment demand.

All these factors have lead to lower platinum prices.

Platinum’s two primary uses are in automobile manufacturing and in jewelry as shown by this chart from the World Platinum Council:

platinum demand chart 2019

IS NOW A GOOD TIME TO BUY PLATINUM?

As an investor, if you were to look simply at the supply and demand outlook, platinum does not seem like an opportune buy. Further, since platinum is not a traditional “hard currency” or “Money Metal” like gold and silver, it has not historically received benefit as a “Safe Haven” investment during stock market corrections or global turmoil.

However, consider the following:

Platinum is Extremely Rare

All the platinum ever mined would fit in a room that is 25 feet by 25 feet. This makes it over 25 times rarer than gold! Of the precious metals, only palladium and rhodium are rarer.

Available Platinum Supply is Depleting

90% of the platinum ever mined is consumed for industrial purposes. For gold the exact opposite is true: most gold ever mined has not been consumed and is available to buy and sell today.

Platinum’s Supply Chain is Fragile

Approximately three-quarters of the world’s platinum supply comes from a single country: South Africa. South African mining operation face potential disruption from threats of civil war, mining nationalization, energy blackouts, labor strikes, and closure. Any such disruption could substantially affect the price of platinum.

Increase in Investment Demand Could Dramatically Affect Price

Currently, investment demand is only 3% of platinum consumption. However, due to the very limited amount of platinum being mined and the small amount available, even a relatively small increase in investment demand could dramatically increase platinum’s price. If investors flock to hard assets, this is not an unrealistic scenario.

The Current Price of Platinum is at or Below Its Cost to Mine

The World Platinum Council estimates that is costs approximately $900 to produce one ounce of platinum. Basic economics tells us that if the price of something is less than its production cost, production tends to stop until the price rises. If you buy platinum at or below its production cost, you take on very limited risk of dramatic losses.

SHOULD I BUY PLATINUM IN ADDITION TO GOLD AND SILVER?

Since platinum is not a time-tested hard currency or “money metal” it is generally not appropriate to recommend as a pure alternative to gold and silver for the average precious metals investor. However, some investors with a willingness to speculate should consider some allocation to buy platinum. Your Dedicated Midas Gold Group Account Representative can help you determine if platinum is a precious metal you should include in your hard asset portfolio.

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