Investing in Platinum
Unlike gold and silver which have been used as money for thousands of years, platinum was not used as a monetary metal until the early 19th century. Interestingly, it was earlier widely thought of as a nuisance which interfered with gold mining operations, such as by the Spanish Conquistadors during the 17th century in South America.
Today, platinum is a widely used but extremely rare industrial metal. It is used in a wide range of applications including the automotive, jewelry, dental, medical, chemical, electrical and glass manufacturing industries. Though in similar abundance to gold in the earth’s crust, platinum is far rarer than gold above ground, but unlike gold, its annual supply is consumed by its application demand. As a result, it is claimed that all the platinum ever mined in history would fit into a cube less than 25 feet on each side.
Today, the majority of platinum is mined in just two parts of the world. South Africa produces a little over two-thirds of the world's annual supply, and Russia produces about the same as all the other regions combined. As a result, and recalling the limited amount of above-ground stockpiles, the annual supply of platinum critically needed by industry is dependent on these countries producing regular quantities of the metal with little or no interruption.
With potentially decreasing supplies coming to market, the investment potential for platinum is favorable. In past years, changes in the supply/demand dynamics of platinum have resulted in dramatic changes in the price of platinum, and the potential for more price swings in the future could be attractive to traders seeking to take advantage of the platinum market's volatility and opportunity. As one example, when gold reached its recent $1,800 high, platinum exceeded $2,200 per ounce.click button to review transcript
Mike Maroney: My name is Mike Maroney. I am coming to you today from the Monex Precious Metals Studio. We're talking with Jeffrey Christian who just so happens to be in South Africa, the home of a good percentage of the world's platinum. So, today we're going to do a video that incorporates the, "Prepare and Diversify with Gold and Silver", but we're going to talk a little bit more about the PGMs, the Platinum Group Metals.
So, Jeff, let’s talk a little bit about the PGMs. We've seen an interesting move in platinum over the last few weeks. We traded a little bit below $800 and then we had a quick spike back to the upside all the way back up to $860. We've since pulled back down around $820 and a lot of people are curious with the spread between platinum and gold at over $400, a lot of people are looking at it and saying, "Does it make sense to diversify some of my precious metals holdings that I currently have in gold and diversify a portion in platinum?" What's your view on this?
Jeffrey Christian: Well, our view is that platinum and gold are quite different animals and that's being reflected in the spread between gold and platinum presently. Gold prices are much higher than platinum are now, because a lot of investors around the world are buying gold and holding gold against economic and political dislocations that they expect to emerge over the next several years. Platinum is a much more industrial metal. It's really not a financial asset like gold and silver, but that said... so it trades more off of its fundamental and the fundamentals are much more bullish and positive than the market seems to perceive right now. So, our view is that platinum, as a commodity, is undervalued and probably will revalue itself over the long run. So, we're telling our clients that we're interested in platinum as well as gold right now. We've had clients who say, "Well, should I sell my platinum and buy gold?" or vice versa. Our answer is basically, "No, we think you should hold onto both your gold and your platinum, because we think over the next five to ten years both of them will perform very handsomely and over the next two years they'll start to move up more positively than we've seen over the last year or two."
Mike Maroney: Now, it's interesting, because palladium now trades at a premium to platinum. Today, I think the premium is about $100, and some people believe that when the premium gets too high, inevitably you see retooling in the car industry. Could you share some of the information that you talked about the other day with us on that subject, as far as platinum being switched into the catalytic converters instead of palladium?
Jeffrey Christian: It's an interesting topic where a lot of people are saying things about things that they don't really understand or know about. There are people who say that you can make this move from palladium back to platinum callous and very quickly, and there are people who will say it's going to take three to five years to retool and re-engineer the vehicles, and they're actually both right. The reality is that most auto makers multi-certify their cars per model year, so that they can immediately switch between platinum intense and palladium intense catalysts-- they can do that. Now, when you do that without retooling your exhaust system or your fuel injection system, you don't necessarily have the most efficient performance. So, if you think that you're going to shift away from palladium back toward more platinum intense catalysts, you're going to want to retool your exhaust system, your fuel injection system, and that's going to take three years to do. So, both sides are right and both sides are wrong in that you can in fact immediately switch, and I wouldn't be surprised to see some automakers already doing that, but to really do it in an efficient way, if you think that you're going to make a permanent or semi-permanent shift, you're going to probably take three years to retool your exhaust system.
Mike Maroney: Now, I think what we'll do now is just look at price, because platinum has traded below $800 for a short period of time this month and many people believe that there's a lot of value in that price and I think you have to go back 14 years to find similar price levels. Now, obviously, you believe it's a good time to buy platinum, but you're talking about a four to five year hold. What is your price target, and where do you think platinum makes for a good entry point, and where do you see platinum headed maybe in the next four to five years?
Jeffrey Christian: Right. Yeah, I should clarify that. We think that platinum prices will rise very sharply in the period... four, five, six years from now, but we also think that they're going to be rising sharply. I think the entry point is right now. When the platinum price spiked down to $800 on the first trading days of July, we were telling our clients we think this is good. There's a tremendous amount of bearishness in the market toward palladium right now and a lot of that bearishness is... is... ill-advised in that it is predicated on the view that diesel fuel is going away very quickly and that cars are transitioning from petroleum based engines to electric vehicles much more rapidly than they are. Both of those are very long-term transitions and in the meantime, the auto industry is going to need a lot of platinum. So, there's a lot of bearishness that has pushed the platinum price down. I would not be surprised to see that the platinum price... $880, $890, $900 by the end of this year, which is five months from now. So, if you say it's going to go from $825 to $900 that's a 10% appreciation in six months. That's a very nice, handsome return. I think it'll go much, much higher over the next five years and I won't be surprised to see the price double what it is today by say 2025.
Mike Maroney: So, what we're looking at then, platinum in the $750 to $850 price zone. Looks like a tremendous buying opportunity. Not, only based on the fact that... one, it's been knocked down and maybe it's been knocked down for the wrong reasons, but long-term it looks like a spectacular long-term play. Is that correct?
Jeffrey Christian: That's exactly what I'm saying.
Mike Maroney: Now, one last question, Jeff. How about the metal palladium? I know we've had a tremendous move in palladium from the $480's all the way up to $1,100. We've since had a bit of a pullback trading as low as $915 today. Where do you see palladium headed in the next six to 12 months?
Jeffrey Christian: I think palladium moves sideways in the next six to 12 months. It's risen very strongly over the last two years; it's risen to record levels. The market I think is pausing to evaluate it. Interestingly, what you're seeing is... you're not seeing a lot of investors selling palladium. There has been some sales. ETF sales have been sort of off, but that had to do with really the stock market in Johannesburg here and the relationship between platinum mining shares and platinum and palladium metal prices. You haven't seen a lot of investors disgorging. So, even though the prices have risen to record levels, they're sort of trying to evaluate and they're saying, "You know what, we think that the palladium supply/demand balance is much tighter than it was before. We think that the palladium supply/demand balance is much healthier than the one in platinum. We think that the palladium price has the capacity to continue to rise. So, probably, we're not going to sell. We are going to hold onto our metal." In that kind of environment, you will continue to see palladium used in the auto industry and catalytic other chemical or petroleum refining catalysts and electronics and in other applications. You're going to see a very tight palladium market and you're probably going to see higher prices. So, we think that the market is sort of pausing to adjust to the fact that it's reached record levels now, but then it's more likely to rise from here... 12 to 24 months from now, than it is to be lower.
Mike Maroney: So, as far as price is concerned, do you have a bottom end to the range that you feel palladium makes incredible sense, as far as a longer-term investment is concerned?
Jeffrey Christian: It's hard to say, but probably about $850 or so. So, not too far below... we do think that there's a possibility that the price could slide down from where we are now, as it already has somewhat due to profit taking. But, we think that the strong fundamentals and the fact that you're in a very tight market with a backward dated, forward spread, suggests to us that any price weakness is going to be followed by investment buying and inventory buying by industrial users, which will take the price back up.
Mike Maroney: Fantastic! Obviously, we've had a lot of questions on the PGMs. So, we wanted to bring Jeffrey Christian in to share some of the incredible knowledge that he has, as far as all the precious metals are concerned. Jeffrey, thank you so much for spending a lit bit of time today explaining your thoughts on the PGMs.
Jeffrey Christian: It's my pleasure.
Mike Maroney: Ok! Have a great day, Jeff.
Platinum bullion bars are manufactured by a number of reputable refiners, including Johnson Matthey, Engelhard and others. Pure .9995 fine platinum bullion is available from Monex in 10-ounce bars, which are easy to stack, store, hold and trade. Each bar is hallmarked by a leading refiner, and stamped with a unique serial number, weight and fineness.More Information
Platinum bullion coins are a popular and convenient way to make an investment in platinum. The coins are easy to buy, easy to hold and store, easy to divide, widely recognized and thus, easy to sell and trade. Monex offers platinum coins produced by the U.S. Mint and the Royal Canadian Mint. United States one-ounce Platinum American Eagles are .9995 fine and have a $100 face value. They feature a stylized image of Lady Liberty, and an image of a bald eagle soaring over a setting sun with the coin's weight and purity on the reverse. Platinum American Eagle coins are guaranteed by the U.S. Mint for exact weight and purity. The one-ounce Platinum Canadian Maple Leaf is .9995 fine and carries a $50 Canadian face value. The coin features an image of Queen Elizabeth II on the obverse, and Canada's national symbol, the maple leaf, on the reverse.More Information
Platinum Investing FAQ's
What are the top-ten platinum facts?
Monex' Top-Ten Platinum Facts are:
- Platinum works better than palladium for diesel vehicle pollution control.
- Recent advances in Selective Catalytic Reduction reduces platinum/palladium use in vehicles.
- Jewelry marketshare for platinum is improving noticeably in Asia and with younger generations.
- During the recent bullish metals cycle, platinum outpaced gold, reaching over $2,200 per ounce.
- A one-ounce pure platinum coin is smaller in size than a one-ounce pure gold coin.
- South Africa mine production fell during most of the past decade, and is projected to decline further.
- Although not as malleable as gold, platinum is more ductile and can be better stretched into wire.
- Replacement supply versus fabrication demand has been generally seeing a surplus.
- About 70% of the worlds mining supply comes from economically unstable South Africa.
- Compounds containing platinum are used in cancer treatment, referred to as “Platinum Chemo.”
Where does platinum come from?
The element Platinum, having symbol Pt, is a metal found in the earth's crust. It is one of the top eight rarest elements based on its very limited abundance in the crust. Platinum comes from primary metal-specific mining and as a by-product of nickel and copper mining. In addition, some platinum mined can be reused, and so some supply comes from scrap recovery. Lastly, there are stockpiles such as investor hoarding as a precious metal store of wealth that may be depleted. The significant source of the metal is from South Africa, which produces about 70% of mining supply.
Why should I invest in platinum?
Some experts believe that the stock and bond markets, and the mutual funds that invest in them, are overvalued and potentially at risk for correction similar to the corrections seen in 1929, 1987, 2000 and 2008. An investment portfolio diversified with metals may help protect an investor from the full effect of unanticipated and potentially disastrous market movements such as a stock market crash. In addition, platinum has outperformed gold during periods of metals market exuberance, for example, recently reaching over $2,200. Present price levels are but a fraction of that historic high. Furthermore, considering 70% of mining supply comes from South Africa, unreliable mining supplies could present price volatility and trading opportunities.
Is platinum a good investment in 2017?
Analysis from the CPM Group in a 2017 special report projects that platinum investments will ultimately benefit from shrinking supplies, due to reduced capital expenditure in mining and declining secondary supply. Investors have priced in less-bullish factors from fabrication demand, but they have yet to price in a slowdown in mining. Since South African supply seems likely to fall sharply before auto use declines, the platinum markets seem likely to experience several years of tight supply, which could push platinum prices sharply higher. Such a move may be a few years away, however.
Should I buy platinum or gold?
Buy gold. Then, when you feel you have enough gold, and you want to add some diversification benefits of a blended precious metals position, buy platinum.
What are ways of investing in platinum in 2017?
The best way to invest in platinum is in physical platinum bullion, in ether coin or bar form. Derivative investments are available such as NYMEX platinum futures contracts. However, be cautious in that platinum is difficult and costly to refine, so select only the finest forms of platinum. The “Top-3” choices at Monex to consider for investing in platinum are:
- The Royal Canadian Mint’s One-Ounce Platinum Maple Leaf.
- The United States Mint’s One-Ounce Platinum American Eagle.
- Highly-refined platinum ingots of at least .9995 fineness.
Why should I invest in platinum with Monex?
Monex has been America’s trusted name in platinum and other precious metals investments for 50 years. With customer transactions exceeding $55 Billion, Monex makes a two-way, buy and sell market during its 11-hour trading day, and has never failed to deliver every ounce of metal customers purchase. Monex offers extremely competitive prices on its platinum products, and posts both real-time ask and bid prices online and through its mobile app. Customers and prospective customers may inquire about their particular questions quickly and efficiently, along with discussing current trends and market information, with a Monex Account Representative. Meaningful investments in physical platinum are valuable, and Monex can arrange storage of an investor’s metal at a bank or depository. Customers have the ability to borrow funds from Monex Credit Company using their platinum as collateral. Monex offers the ability to place limit-orders and stop-orders to purchase or sell if and when a selected target price is reached.
What platinum products does Monex offer to investors?
Monex offers the most popular ways to own platinum including pure platinum bullion bars and government-minted bullion coins. Pure 10-ounce .9995 fine platinum bullion bars are ten ounce ingots, which are stamped with the refiner’s hallmark, exact weight and fineness, and serial number. Monex also offers legal tender, pure platinum bullion coins, including one-ounce Platinum American Eagles produced by the U.S. Mint and Platinum Canadian Maple Leaf coins produced by the Royal Canadian Mint.
Should I invest in platinum bars or platinum coins?
When taking personal home delivery of precious metals, especially with platinum, most would agree that coins are simply a better choice. On the other hand, if you choose to use bank/depositor delivery, bullion is likely your best choice.
Does the face value of a platinum coin affect its worth?
The face value of a platinum coin is low in regards to its intrinsic commodity melt value. Therefore, the face value is relatively unimportant and really does not affect its worth. However, having any government currency value is hugely important because that makes it a government guaranteed legal-tender coin and not an unsupported bullion ingot/round. If a government mint were to issue platinum coins with face value exceeding its commodity value, it would affect its worth.
Why do some platinum coins sell for well above a spot price?
Platinum coins that have genuine collector appeal could sell at prices many times the spot platinum prices. However, it remains to be seen if platinum bullion coins that are sold at levels far in excess of their bullion value will maintain that premium over the long haul. Monex only offers coins that fluctuate in price based almost exclusively on their metal content value and not on their rarity. Monex does have an affiliate company, Monaco Rare Coins, which specializes in rare coins and other numismatic collectibles.
What is the minimum amount of platinum I can buy from Monex?
The minimum purchase amount for platinum bullion bars at Monex is 10 troy ounces. For one-ounce legal tender platinum bullion coins, such as the Platinum American Eagle and Platinum Canadian Maple Leaf, the minimum purchase is one unit, containing 10 one-ounce pure platinum coins.
What is the process of investing in platinum with Monex?
Once you have decided on the type and quantity of platinum to purchase, your Monex Account Representative will assist you in executing your order over the phone, and your purchase and price will be confirmed on a tape recorded line after your acknowledgment. A written confirmation will be sent to you with the details of your order. Payment may be made after you order, but must be initiated on the day of purchase, which means you must mail or wire funds on the day of your purchase. You can have your metal (a) shipped to your home; (b) made available for pick-up at over 30 facilities across the U.S. and Canada; or (c) have your metal delivered to a bank/depository for storage.
What forms of payment does Monex accept?
For bank wires from domestic banks, the funds are good (reliable) upon receipt. For bank wires of U.S. funds from foreign banks, the funds are good upon bank verification. Cashier’s checks and personal checks are also accepted; however, a hold-funds period of from five to ten days and bank verification are required. Cash, credit cards, convenience checks, payment in foreign currency or checks drawn on foreign banks are not acceptable.
Is physical platinum taxed?
In regards to sales tax on platinum purchases, Monex only collects sales tax on purchases for home delivery which are under $1,500 for California residents and under $1,000 for New York residents. As a general rule for investment gains, profits are only taxable when you sell platinum, no matter how long you own it. However, you should rely on your tax advisor for such advice.
Will Monex report my platinum purchase to the government?
Monex is not required to report customer platinum purchases to the IRS. However, the IRS does require Monex to report platinum sales by customers to Monex if the sale is platinum bullion bars of 50 total ounces or more.
How do I know the platinum products I get from Monex are authentic?
Monex guarantees the authenticity and fineness of all of its bullion bars and coins. All platinum bullion bars are imprinted with the refiner’s name, exact weight and fineness. All platinum coins are produced by government mints. Platinum coins have an extraordinary benefit in that platinum is more dense than gold and by making a precise size measurement by digital caliper and using a precise digital scale for weight, one can verify the commodity’s special advantage of being the heaviest of the precious metals.
How long does it take to receive my platinum?
Monex carries substantial inventories of precious metals at several independent and highly secure shipping facilities across the country. For the most part, metals are earmarked for customers as soon as their purchase is made. It would not be unusual that platinum products may be acquired or on order to meet extraordinary demand or unique delivery requests. Secure packaging and release of platinum bars or coins to an insured carrier is not done until satisfactory reliable good funds are confirmed. Bank wires are reliable and confirmed as good funds upon receipt. Although cashier and personal checks may clear an issuing bank account, it does not preclude the canceling of payments at some financial institutions. Absent a letter of guarantee from the issuing bank, normal cashier and personal checks are considered reliable “good funds” after five business days. Note, for example, that Wells Fargo Bank has a hold funds policy of five to seven days or more. Because of the high value packages, the shipping facilities use multiple verification means and individual monitoring and recording cameras to assure the integrity of every shipment. On average your metal will leave the shipping facility about two to five days following confirmed reliable good funds. You will be given a tracking number by e-mail or by your Account Representative. During times when the shipping volume is extremely high, as it was in 2008, you will be notified if any delays are expected. For deliveries to a bank/depository you will receive notification directly from the facility upon delivery, which by law is required within 28 days.
Can I track my platinum shipment online?
Once Monex has received payment and the funds are confirmed and considered reliable good funds, Monex will direct one of its independent shipping facilities to package and assign it to either USPS or UPS for delivery to you. Once Monex has received a tracking number for your shipment, you will be notified by email or telephone. If you prefer to pick-up your platinum at one of the over 30 vault pick-up locations, you will be notified when it arrives and you can take possession at your convenience, any time within a couple of weeks without storage costs. Please call 1-800-444-8317 for current pick up locations.
Is my platinum investment insured?
All shipments of platinum products to you are insured against loss or damage in transit. If you decide to have your platinum delivered to and stored by a bank/depository, the metal is fully insured in transit and also while in storage.
Can I store my platinum investment through Monex?
Monex can arrange for the secure storage of your platinum bullion or coin investments. Monex will deliver your platinum with full title and ownership in your name to one of the independent bank/depository facilities that provide storage for Monex customers. These bank/depositories include Brink's in New York. When your metal is received by the bank/depository, the custodian of the facility will send you a document acknowledging the receipt and your ownership of the platinum being stored in your name.
Where is the best place to sell-back my platinum?
Since 1967, Monex companies have made it a priority to buy back coins and bars that customers have purchased from Monex at attractive then-current Monex bid prices. Its multi-billion dollar, two-way buy and sell market is a hallmark and tradition at Monex, and is your assurance of liquidity for your platinum bullion or coin investment. Under certain circumstances, Monex may buy highest investment quality platinum that was purchased from another respected metals dealer. Be aware that some restrictions and additional verification costs may apply. Please contact a Monex Account Representative for additional details.
How does the platinum sell-back process work?
Selling your platinum bullion or coin investment back to Monex is a relatively easy process. When you are ready to sell your platinum, just contact your Monex Account Representative for shipping instructions. Shipments must then be sent by USPS registered and insured mail with a return receipt. Customers are responsible for fully insuring their shipments until it is received by Monex. Once the shipment is received and verified you will be notified and able to sell your platinum. Proceeds of your sale will be sent to you in the form of a check or bank wire, or if you prefer, credited to your account. If your platinum is in storage through Monex Credit Company at one of the bank/depositories, you can sell your metal over the phone at any time without delay. The transfer of title to the platinum from you to Monex will follow your sale, and the bank/depository will notify you by mail that the transfer of title has occurred. There are no delivery charges when the platinum stored through a Monex Atlas Account is delivered to or from a bank/depository storage facility.
Can I borrow cash against my physical platinum?
With storage of platinum through Monex at Brink’s, you can use your metal as collateral to borrow cash against it whenever you want. Monex Credit Company, a California Finance Lender, offers cash loans of up to 75% of the value of your metal while you retain full title and ownership of the metal. Interest rates vary but have been 5.9% per annum since 2006. There are no loan set-up fees or penalties for repayment at any time. You can call your Account Representative and have the cash proceeds of the loan immediately sent to you, or you can use the loan to pay for a purchase.