How To Invest In Platinum
Platinum, one of the most expensive exchange-traded metals on the market has been gaining in popularity in recent years thanks to its wide variety of uses. Platinum is a very popular metal for use in autocatalysts which are products that help carmakers clamp down on harmful emissions and are required in most countries for all cars. While these catalysts take up the majority of platinum\‘s demand the product is also heavily used in electronics and increasingly, jewelry as well. This use in jewelry likely stems from the metal’s prestige as well as its brilliant white finish that makes it a great compliment to precious stones or diamonds.
Platinum has appeal as an investable asset for several reasons. First, if investors continue to lose faith in the fiat currencies and the U.S. dollar in particular, demand for platinum could rise as an alternative, although less so than the other precious metals since platinum is so scarce. Platinum also has appeal as an inflation hedge or as a way to play increasing demand for the car industry since so much of the product goes towards autocatalysts. Thanks to this heavy industrial demand, prices of the metal are often heavily correlated to automobile production and usage making the metal increasingly dependent on emerging markets for higher prices. Furthermore, since the production of the metal is so heavily concentrated in emerging nations, the product is often prone to price spikes which could make the product a great options for traders in the precious metals space.
Investors seeking exposure to platinum have a multitude of options. In addition to buying futures contracts on platinum or purchasing and holding the physical metal in the form of coins or bars, there are a number of ETF and equity options available as well. Investors can purchase stocks or ETFs of companies that mine the metal as the primary way to achieve equity exposure. Lastly, investors also have the option of buying platinum ETFs, either ones that track the futures for the metal or those that physically hold the product in secure vaults. Thanks to the metal\’s extremely high value to density ratio, holding platinum is a very cheap way to achieve exposure to the precious metal.
Ways to Invest in Platinum
There are 4 ways to invest in Platinum: ETFs, Futures, Physical, and Stocks.
What are Platinum ETFs?
Exchange-traded funds have become a popular option for investors seeking exposure to platinum, as this structure minimizes expenses while eliminating challenges associated with physical storage. While there aren’t nearly as many ETFs that focus on platinum as the metal\’s more famous cousins of gold and silver, there are still a number of choices nonetheless.
In terms of physical exposure, the most popular choice is the ETF Securities Physical Platinum Shares (PPLT) which holds physical bars of the metal in secure vaults in Europe. For those looking to invest in platinum futures via the ETP structure, two options are available; the iPath DJ-UBSPlatinum TR Sub-Index ETN (PGM) and the UBS E-TRACS Long Platinum TR ETN (PTM). It should be noted that both of these funds are structured as ETNs so they do carry some level of credit risk. For those looking to go short platinum, an option exists for that as well, the E-TRACS UBS Short Platinum ETN (PTD).
Exposure to platinum focused equities is also possible as First Trust has an ISE Global Platinum Index Fund (PLTM) which tracks companies that are active in platinum group metal mining.
What are Platinum Futures?
Platinum futures trade on the CME under the symbol PL. These contracts trade in sizes of 50 troy ounces each and are priced in U.S. dollars and cents per troy ounce. Trading terminates on the third last business day of the delivery month and settlement is physical and the platinum must be at least 99.95% pure. Trading is conducted over 15 months with the current month and the next two calendar months before moving to a quarterly cycle of January, April, July, and October.
Additional platinum resources include:
How to Buy Physical Platinum
Some investors seeking exposure to platinum prefer to own physical coins or bars instead. This strategy ensures that the value of the assets held will move in unison with spot prices, removing the nuances of futures contracts. Because platinum has a very high value-to-density ratio, it is relatively cheap to store a material amount of platinum bullion. However, the value of platinum also means that investors must make arrangements for secure storage which can increase costs.
There are a number of companies that sell platinum coins and platinum bullion. Investors should understand that there may be a premium to purchase platinum coins, and should determine if any bullion purchased meets quality and purity standards.
How to Buy Platinum Stocks
For investors seeking to establish exposure to platinum prices, the stocks of companies engaged in the extraction of the precious metal may be an intriguing opportunity. Platinum miner stocks tend to exhibit a strong correlation to spot platinum, prices, and often trade as a leveraged play on the underlying commodity.
There are a number of publicly-traded platinum mining companies headquartered and traded around the world. Some of the best-known companies include:
- Stillwater Mining Company (SWC)
- Anglo Platinum (AGPPY)
- Impala Platinum (JSE: IPA)
For more complete lists of platinum-related stocks, see the holding of the following ETF: