How to Buy Platinum

Over the recent weeks we’ve seen some serious activity in gold and silver. Fallings prices, of a magnitude not witnessed in over 30 years as well as an, albeit short-lived, relief rally. With all eyes on gold and silver prices it’s easy to forget another precious metal though – platinum. Today, there’s a very interesting set up in the market for platinum, which opens up some opportunities for us as buyers. Get the details below on how to buy platinum and why buy platinum.

Let’s start off with why should you own platinum in the first place. Similar to gold, platinum is an insurance against the consequences of the heavy spending of the world’s governments, and the accompanying currency devaluations. Platinum is a precious metal and will thus hold its value better in a time of crisis than any fiat currency will – since it can’t be manufactured out of thin air. It will always have an intrinsic value.

Platinum is furthermore an industrial metal – a very rare one – about 100 times more rare than gold. It’s used in catalytic converters, laboratory equipment, electrical contacts and electrodes, platinum resistance thermometers, dentistry equipment and jewelry. The former Soviet Union and South Africa account for about 90% of the world’s primary platinum production.

Platinum doesn’t have a large above ground supply like that of gold. It’s more similar to silver in the sense that a large portion of the annual production is used for industrial purposes. There is a strong demand for platinum in for example smog-reducing catalytic converters.

The production of platinum is however falling in the world’s biggest producer – South Africa. As with many of the gold mining companies, platinum producers aren’t earning enough money to cover their production costs and expenses, given the current price level.

So the demand side of this equation will remain strong but supply is dwindling.

This should push prices higher. According to some estimates, the platinum market was already in deficit by 375,000 ounces in 2012. Primary platinum supply fell by 13% in 2012 to 5.64-million ounces, its lowest level in twelve years.

As is illustrated by the graph below the price for platinum has taken a hit, together with gold and silver, over the course of the last few months. Current prices are around 24% below the peak from 2011.

how-to-buy-platinum

This makes platinum an attractive supplement to buying silver bullion and gold bullion – as it offers the same protection, due to it’s rarity – but the increasing industrial demand in combination with diminishing supply creates some additional opportunities. Especially given the current price level.

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