Platinum, one of the world’s most beautiful metals is also one of the rarest – about 100 times more rare than gold. Because platinum is both a vital industrial metal and one with limited sources of supply, it is considered a strategic metal. The former Soviet Union and South Africa account for about 90% of the world’s primary platinum production. Canada produces about 5% of the platinum supplies, and the bulk of domestic platinum supplies are obtained from reclaiming operations or import. Fears of supply interruptions have resulted in the U.S. Government holding platinum in its Strategic Stockpiles. The United States depends largely on foreign platinum supply. Since platinum is commonly found in conjunction with nickel, a costly refining process is necessary to recover even menial quantities of the metal from tons of ore. This is a primary reason for platinum’s exceptionally high value. Combined with its rarity, the demand for platinum in the marketplace exceeds its free world supply, making it an extremely attractive investment opportunity.
In spite of its rarity, platinum has established a pattern as an excellent investment vehicle. Although gold and silver are the predominant precious metal holdings, there has been a significant increase in platinum investments over the past several years. During this period the price of platinum has risen to a high of over $1100 from its low of less than $200. Rapid growth in demand and limited supplies have contributed to platinum’s popularity with investors. Many investors in metals now include platinum in their portfolio. No wonder platinum is considered an excellent investment medium; it can act as a hedge against inflation as well as provide long or short term profit.
Well known for its use in fine jewelry, platinum has a variety of strategic applications that add to its universal demand. Important for its catalytic properties, and resistance to corrosion, platinum plays a role in the manufacturing of gasoline, fiberglass and catalytic converters. It is also widely used in the electrical, chemical and medical industries. Growth in platinum consumption worldwide is expected to increase tremendously. Usage in established markets is increasing and new markets are constantly being developed; factors that promise to keep demand for platinum high and investment potential good.
Platinum has a much shorter history in the financial sector than either gold or silver, which were known to ancient civilizations.
Platinum is relatively scarce even among the precious metals. New mine production totals approximately only 5 million troy ounces (150 Mg) a year. In contrast, gold mine production runs approximately 82 million ounces (2550 Mg) a year and silver production is approximately 547 million ounces (17000 Mg). As such, it tends to trade at higher per-unit prices.
Platinum is traded on the New York Mercantile Exchange (NYMEX) and the London Platinum and Palladium Market. To be saleable on most commodity markets, platinum ingots must be assayed and hallmarked in a manner similar to the way gold and silver are.
The price of platinum changes along with its supply and demand; during periods of sustained economic stability and growth, the price of platinum tends to be as much as twice the price of gold, whereas, during periods of economic uncertainty, the price of platinum tends to decrease because of reduced demand, falling below the price of gold, partly due to increased gold prices. Platinum price peaked near US$2,300 per troy ounce ($74/g) in March 2008 driven on production concerns (brought about partly due to power delivery problems to South African mines). It subsequently fell to US$780 per troy ounce ($25/g) in November 2008. As of April 21, 2011, the price of platinum is US$1,815 per ounce, compared to US$1,505.91 per ounce for gold and and US$46.37 per ounce for silver. Platinum is traded in the spot market with the code “XPT”. When settled in United States Dollars, the code is “XPTUSD”.