Why Buy Platinum?
While gold and silver have been used as money for thousands of years, platinum too has served as an economic store of value. Platinum has the most industrial uses of the three, and is least recognized for its monetary properties.
Including all three precious metals in a portfolio provides greater diversification within the precious metal asset group, and thus reduces volatility, as each metal has unique economic properties.
Reasons to own platinum include:
Platinum is money
In the bull market of the late 1970s, platinum matched the gains of both gold and silver, which suggests that platinum was acting as a monetary asset during this inflationary period/dollar crisis. Although platinum coins were used in Russia in the nineteenth century, the scarcity of platinum, combined with its much higher cost of production, make it a poor choice for this purpose. It has, however, served as a store of economic value for 300 years.
Limited Source of Supply
Since 1997, demand for platinum has exceeded mine production, and global platinum demand continues to grow to record highs. Unlike gold, there are no large aboveground supplies of platinum.
Currently, South Africa accounts for 80 percent of the world’s annual production of platinum and contains 88 percent of the world’s platinum reserves. This is one reason why the platinum price is more volatile than that of gold or silver – it is sensitive to political unrest in South Africa.
Platinum has many more industrial uses than gold or silver. Unlike gold, over 50 percent of the platinum produced is consumed (destroyed) in industrial applications. Platinum is indispensable for many industrial uses, such as catalytic converters in diesel engines.
Leading Inflation Indicator
According to a study by Wainwright Economics, a Boston-based investment research and strategy firm, platinum is the leading indicator of inflation. While gold and silver lead inflation by twelve months, platinum leads by sixteen months. This was confirmed in the current bull market: The rise in platinum prices started in 1999, while gold and silver began to rise in 2001.
The above factors confirm that platinum deserves its place alongside gold and silver in portfolios. Having all three precious metals increases diversification, lowers risk and provides the ultimate in portfolio protection from the economic crisis that is today’s financial reality.