Why buy platinum? What is it and should you even be interested?
In the world of precious metals, gold and silver are by far the best-known. But there are other, even-rarer precious metals. One of these is platinum. It’s a coveted, investment-class precious metal that is highly sought and commands a high price. It’s a commodity that you need to get to know.
Let’s examine platinum: An often overlooked precious metal that’s at the top of the precious metal value chain. We’ll then look at its investment potential and how you can get hold of some.
Platinum, sometimes referred to as “rich-man’s gold”, is a very rare precious metal. It has a global production of about 250 tons per year. This makes platinum more than ten times as scarce production-wise than gold, which has annual output of around 2800 tons (Source: Seeking Alpha).
Despite its rarity, platinum is also an important and strategic industrial metal. It is non-corrosive and has an extremely high resistance to heat. These qualities make platinum ideal for catalytic converters, where it finds great application in the automobile and refining industries. It is also used in the processing of fiberglass and in numerous medical applications.
South Africa accounts for about 78% of global production, generally as a by-product of copper and nickel mining. The second largest producer is Russia. Very few other countries produce it at all.
Comparison to Gold
Platinum is much scarcer than gold and is usually, but not always, more expensive than gold.
By plotting the ratio of platinum price to gold price, one can determine whether platinum is trading at a premium or a discount to gold.
Throughout the early part of 2016, it has traded at a significant discount to gold. Andrew Hecht, in a recent Seeking Alpha article, attributed this discount to very low currency values in Russia and South Africa, the big platinum producers.
After closing in 2015 at $891.70/oz., platinum has recently been trading well into the $900s and higher, up about 8% so far this year. “Rich man’s gold” is appreciating but still lags gold!
This is a good time to invest in platinum, which should revert with time to a premium to gold.
Where to Buy Investment Platinum
Why buy platinum? Because it is a very rare and valuable precious metal, and lately going at a discount to gold. Investment-grade platinum in the form of bullion bars and beautiful bullion coins look like an excellent investment right now. The most popular bullion coins are the American Statue of Liberty Platinum Coin and the Canadian Platinum Maple Leaf Coin, each available in a number of weights.
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