If you are interested in investing in platinum bars, you should know that you are undertaking a challenging and demanding task. Platinum trades in a commodity market with entirely different particulars than those of the gold and silver markets (which practically behave as one). You should also be aware of the risks involved in such a venture and decide that you have a good reason to confront them.
Platinum is a malleable, ductile, precious, gray-white metal of high density. The name is a derivative from the word platina (‘little silver plate’ in Spanish). The metal was discovered in 1735 in South America and its commercial use started in the late 19th century, so has a much shorter history in the monetary sector than either gold or silver which were commonly known to ancient civilizations.
Platinum is extremely rare and this has associated it with exclusivity, prestige and wealth. Platinum’s resistance to wear and tarnish, together with its inertness and shine make it well suited for making fine jewellery, usually as a 90–95% alloy. It is the most ductile of pure metals, however gold is more malleable. Its particular characteristics have been widely used for industrial applications.
Of the 245 tons of platinum sold in 2010, 46% were used for vehicle emissions control devices (catalysts), 31% for jewellery, and only the remaining 35.5 tons went to investment, and other minor applications (electrodes, anticancer drugs, oxygen sensors, spark plugs and turbine engines).
Investing in platinum bars
Platinum is a precious metal commodity traded in the form of coins, bars, and ingots. The price of platinum changes depending on supply and demand. Like other industrial commodities (such as silver), the price of platinum is more volatile than the price of gold. During periods of economic stability and growth, the price of platinum may reach as much as twice the price of gold, while during periods when the economy is slow, the price of platinum tends to decrease due to reduced industrial demand, even falling below the price of gold; this is also partly due to increased gold prices, as gold is considered the ultimate safe haven. Gold prices are more stable in times of economic uncertainty as gold demand is not driven by industrial uses.
The price of platinum peaked at $2,252 per troy ounce in March 2008, but by October that same year it plunged in the area of $800 before gradually recovering. Sadly, the market is often driven by fashion, fear and greed, and the only way to beat this is by learning as much as you can about the metal and the platinum market.
Platinum is primarily a luxury item rather than a safe haven, while only one fifth of the world production is used for investment. Platinum bars are an industrial commodity, volatile as the market goes, and it can potentially offer you considerable profit, as long as you exercise common sense.