Investing in precious metals can be attributed to passive income options. While gold and silver are familiar to most investors, platinum is still treated with caution. This investment object has its subtleties, so spotted investment in platinum is not recommended.
Statistical data and specialist analytics speak of the growing attractiveness of platinum as an investment option. The price of platinum exceeds the price of traditional gold, so this metal is rightfully called the most prestigious and expensive investment object.
Platinum jewelry is made in a combination of precious stones, which makes it a premium item. Considering that 90% of the metal is mined in South Africa, and almost all the rest in Russia, the decrease in supplies affects the price.
Mining and use of platinum
World platinum reserves are distributed extremely unevenly. As mentioned above, production goes to South Africa and Russia near Norilsk. Based on this, the only significant player in the metal supply market is South Africa. After long strikes at platinum ores in South Africa, metal supplies began to decline in 2012. The market did not observe a strong surge in price even against the background of a shortage. When supplies returned to normal, platinum began to fall in price and 2016 became almost twice cheaper than in 2012. Since the end of 2016, the metal has again gone up due to a decrease in supplies. Deliveries began to decline due to lower demand.
If the currency is pegged to the gold equivalent, then this does not apply to platinum. For investment purposes, metal in its pure form is little used. The value of platinum is great in the jewelry industry, which uses more than a third of all the metal supplied. At the same time, China consumes 20%.
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Industry (production of catalysts for diesel vehicles) uses about 40% of the supply. This is because the standards for carbon monoxide and nitrogen emissions (Euro6) are being tightened, so catalysts are in demand in the automotive industry.
It was expected that due to the new standards, the price of platinum should rise, however, the events of 2016 will hit the catalyst industry. Several automotive concerns have announced a reorientation towards electric vehicles. Tesla Motors has said it will double its EV production in 2018 and 2020. China also intends to get rid of buses. Due to this, the consumption of platinum in the industry is unlikely to grow, which will again affect its price.
Approximately the same volumes of platinum are used in the chemical industry and for investment purposes (about 6%). Medicine and electronics production consumes about 13% of the metal.
What affects the price of platinum?
There are enough factors. This or that factor can shake the value of the metal in any direction. Let’s highlight the main ones:
Economic condition. In times of crisis, the price drops as production stops. So, in 2008, due to the fall in the automotive industry, the price of platinum collapsed. Even the decline in production did not provoke a surge.
Scientific and technological progress is a catalyst for platinum. As soon as there are areas of new use of this metal, the price immediately begins to creep up.
Relationship between palladium and platinum. If one of them falls in price, then the other begins to rising and vice versa. This trend is also observed about gold.
Oil and platinum. Cheap oil leads to an increase in demand for cars, the production of which requires large amounts of platinum. High demand drives up the price.
Speculation. This, of course, affects the price of platinum, but not so tangibly.
As with any type of investment, to add platinum to your portfolio, it is worth studying the factors that can affect its price.
As an investment, platinum is best used for the long term and not as the only investment option. If we take 2008, when the price sank to a minimum, there was no panic among investors or sales of bullion, and people did not run to hand over platinum jewelry to pawnshops en masse. It’s just that these investments were left until better times.
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Platinum Price Predictions.
After long strikes in South Africa, there was a decrease in supplies. Everyone was waiting for a price jump, however, this did not happen due to the emergence of a secondary market for platinum (catalyst recycling). At this time, South Africa again began to increase the supply of platinum, which again reduced the price. If in 2014 the price per troy ounce was 1.5 thousand dollars, then in 2015 it was already 1.2 thousand dollars, although everyone expected growth. In 2016-17 the price was about 1.1 thousand dollars, and in 2018 it is projected at the level of 1 thousand dollars.
How can you invest in platinum?
The most reliable option is a bank. The main thing is to study the conditions and imagine what income you can get. There are several ways to invest:
If a depositor had invested 100 tr. in platinum a year ago when the average selling rate was 1,730 rubles. per gram (57.80 gr.) and would sell it in 2018 at the purchase rate at Gazprombank for 1722 rubles. per gram, then I would have lost 463 rubles, receiving only 99,537 rubles. As you can see, investing in platinum is not always profitable.
Should you invest in platinum?
You can use platinum for investment purposes. However, although it is a valuable metal, it is very dependent on the economy and industry. Investments in platinum will pay off in a stable economy when production is on the rise and there is a great need for metal.
In conditions of crisis and instability, the price of the metal will fall. Under these conditions, you can wait for the low and buy platinum. Given that the metal has a limited and non-renewable volume, the price should rise in the future. You don’t have to choose between gold and platinum.
These are two metals, but with different actions. It is harmonious if both of them are present in the investment portfolio. Platinum, according to experts, will work in the future with the development of technology and production. Gold has so far remained a traditionally reliable option for storing capital over a long period.