Important Facts You Should Know Before Investing in Platinum

While it is indeed a lucrative precious metal investment, you should be completely aware about the pros and cons of investing in platinum. Here are a few important facts that you should know before you make an investment.
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Fact about investing in platinum
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According to buygoldsilver.com, the cost of platinum peaked in 2008 at $2,300 per ounce due to problems with platinum mines. People who could capitalize on this price surge registered a good amount of profit. Similarly, you must also be on the lookout for the right opportunity and time to trade in platinum.

Investing in precious metals has been a popular choice among investors who want to diversify their portfolio and secure their investments against stock market crash or economic uncertainties. This makes it one of the most sought-after precious metals by investors. About 90% of platinum is sourced from South Africa and Russia, a majority of which comes from South Africa. It has extremely high value to density ratio. Ever since platinum has emerged as a potential investment, the debate of platinum versus gold investment has grown even stronger. About a decade ago, platinum was considered to be more valuable than gold, the price of which was almost 150% of gold. However, in recent years, the growing demand for gold has pushed it near the price of platinum. Here are a few vital tips for platinum investment, which will serve as a guide to you.

Why Invest in Platinum?

» Platinum is a very rare and non-corrosive metal, and hence, it is expensive.

» Though it enjoys a small market share when compared to the tried-and-tested gold and silver, it is still a popular choice of investment.

» Platinum is an eco-friendly metal that is used in several consumer goods. The demand for it will increase as the importance of environmental consciousness will grow.

» It does not have an easy-to-mine steady supply. If the supply of platinum is limited to meet the growing demand, its prices are bound to rise, thus, making it pricier.

» As the economies of the world will expand, it is touted to be one of the safest and popular choices of investment.

» Platinum faces a strong demand in the automobile industry, as it is used to make catalytic converters.

» As the refinement procedure of mined platinum is complex, it helps in fetching a good price.

» If you are planning your retirement, then IRA-eligible platinum bullion can be a part of your Individual Retirement Account (IRA).

Buying Platinum

» As a novice platinum investor, you can start by investing somewhere between $1000 - $1500 based on the price per ounce, budget, and investment vehicle.

» You can inquire with your bank and other financial institutions like credit unions about buying platinum from them.

» It has been advised by experts that platinum should be ideally bought during the period of low price movements.

» You can buy platinum online, but ensure that you buy it from genuine and reputed dealers. Look for people who have been in this business for a decade or more.

» You must look for the period where there are lower premiums above the spot price; this is the right time to invest a considerable amount in platinum to gain more profit.

» You can also invest in physical platinum with platinum bullion, coins, bars, jewelry, etc.

Selling Platinum

» As platinum is a rare precious metal with so many industrial and investment uses, its price will increase, thus, allowing you get a good rate of return.

» Unlike gold, which fares well when the economy is not doing well, platinum will fetch best prices when the economy is relatively stable.

» For gaining a better rate of return, study the market and sell when the conditions are conducive.

» Platinum investment may not work for short-term holding and may fare better for the long term.

Investment Vehicles

» ETFs
» Futures Contract
» Physical Platinum
» Stocks
» Spread Betting

Pros

» It is an easily liquidable investment that can be exchanged for cash.

» It provides hedge against inflation, war, and economic uncertainties.

» It has depicted a stable increase in the price with a few fluctuations, and hence, it becomes a safer choice for investors.

» If the price of fiat currencies falls, there is a possibility that precious metals like platinum, gold, and silver will tremendously increase in value.

» While the value of gold is highly dependent on the value of the US dollar, platinum is not entirely based on it. Hence, the price will not get affected due to the volatile fluctuations in the price of the dollar.

» The increase in demand of platinum in the manufacturing sector will ensure that the price will rise in future.

» Investing in IRA-eligible platinum bullion can help you get tax advantages as well as a steady increase in investment.

Cons

» People still prefer to invest in precious metals like gold and silver, rather than experimenting with the newfound platinum investment.

» There is very less financial history attached with platinum investment, which discourages people from risking their money in it.

» Storage and security of physical platinum may become a problem.

» It can even warrant extra cost for insurance and storage.

» You may fall prey to fraudulent schemes, where vendors offer overnight delivery of platinum and make you pay. While the payment gets debited, your investment never arrives.

» It has a high spot price, and therefore, it can be unpredictable to a certain extent.

» A majority of platinum is mined out of South Africa, which was facing many political and infrastructural problems in meeting the demand. Hence, it is not advisable that you invest in it.

There are two types of platinum ETFs: one that tracks the platinum futures, while the other maintains an actual stock of platinum in their private vaults. You can choose any one according to your requirement. Now that you are aware about the pros and cons of investing in this metal, add it to your portfolio to stabilize your investments. Hopefully, you will be able to cash in on the profits at the right time.
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Published: April 1, 2014
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