Special Report: Playing Platinum: Invest in the Metal More Precious Than Gold!

The first written account of this marvelous metal dubbed it “a substance with it has hitherto been impossible to melt by fire or by any of the Spanish arts.”

The world was baffled by this metal, which shared its appearance with well-known silver but differed in its makeup and use.

Studies eventually proved platinum useful for a wider range of things than either of its valuable counterparts.

It's found in electronics, jewelry, and most often in cars.

Today, platinum is known to be rare and extremely valuable.

In fact, it could be an investment even better than silver or gold...

Seeing Silver

Platinum has much more in common with silver than it does with gold. That's because, unlike gold, platinum plays a role as an important industrial metal.

About 40% of the world's platinum demand comes from the automobile industry. Platinum is a key material for the production of catalytic converters, which have been a standard and regulated part of vehicles since the 1970s. Another 20% comes from other industrial applications.

Short of being the catalyst in a catalytic converter, platinum is used in the refinement of crude oil and the production of high-octane gasoline.

When added to cobalt, it becomes a major component of high-strength permanent magnets. Its level of electrical conductivity and ductility makes it useful for fine resistance wires, as well.

Platinum can also be found in medical and laboratory equipment because it's strong, resistant to a number of chemicals, doesn't tarnish, and doesn't oxidize.

Despite this, the metal can chemically oxidize a number of other elements and is used to create raw materials for fertilizers, titanium stabilizers, and even explosives!

Compounds made with platinum are also used in the medical field as forms of cancer chemotherapy.

Pure platinum can be found in something called a placer deposit, in which minerals have been worn down into sediment and settled together due to gravity. Platinum's comparative density makes it easy to separate from the mix.

However, most platinum production comes from copper and nickel mining. It appears as a by-product of both.

South Africa currently has the largest reserves in the world and produces a total of 75% of the world's supply. The second-biggest producer, Russia, isn't even a close second to this majority.

Even recent setbacks, including a large-scale strike in 2014 and production shutdowns in early 2016, haven't put South Africa anywhere close to second place in production numbers.

Now, keep in mind that this metal is still extremely rare. And rarity plus a wide range of uses often equals something extremely valuable.

It isn't compared to silver and gold for nothing.

Buying the Best

Platinum is the best buy among precious metals, at least while gold and silver prices are flying high. This makes it more affordable than either precious metal and, some would argue, more useful.

In mid-2016, it traded for around $1,000 an oz. At that price, platinum could outperform both gold and silver.

Like gold and silver, platinum is a proven hedge against crumbling equities markets. And during downturns in stocks and bonds, investors will flood into platinum, which will cause wild swings in prices.

For example: Between August 2007 and February 2008, the price of platinum shot up 70% as the U.S. entered the Great Recession. To compare, gold prices increased just 45% in the same timeframe.

Investors began to fear that the U.S. economy could pivot into a recession at the end of 2015. And the disappointing employment report on June 3, 2016, whipped up new angst over recessionary pressures.

When investors start to see a slowdown in U.S. economic growth on the horizon, the demand for recession-inverse assets like platinum swells.

And to make it worse, World Platinum Investment Council (WPIC) estimates that there will be a deficit of about 250,000 oz. of platinum annually from 2016–2021.

To cover this gap in supply, producers will likely dip into their significant platinum stockpiles, which have provided supplies during labor disruptions and helped suppress prices.

But this, of course, could be great for investors...

Bringing Home the Platinum

There are several ways to invest in platinum. The most direct way is to own the physical metal.

The official platinum bullion coin of the U.S. is the American Platinum Eagle. The American Platinum Eagle is one of the world’s most widely traded and well-known platinum bullion coins.

However, production of these coins is limited, and they sell at a high premium over spot platinum prices. With platinum prices at almost $950 an oz., a 1-oz. American Platinum Eagle would set you back about $1,025.

A much more affordable and well-known platinum bullion coin is the Canadian Platinum Maple Leaf.

Privately minted bars from PAMP Suisse, Johnson Matthey, Engelhard, and others offer the lowest premiums for platinum bullion. Still, the premium for these coins is high relative to gold bullion.

But before you buy any physical platinum, you should be warned of one major drawback: Physical platinum is not very liquid.

Buying platinum bullion is easy. But selling large, investment-sized holdings can be a hassle. So, I don't recommend that you own a lot of physical platinum as an investment.

Nevertheless, selling a few oz. of platinum won't be too troublesome. And there might be a circumstance where you'll most benefit from a fast cash transaction. So, it's certainly worth it to own at least some physical platinum.

Buying is easy. Every major online bullion dealer sells physical platinum and will ship it right to your house.

Among the most affordable (and liquid) platinum bullion coins on the market right now is the 1-oz. Canadian Platinum Maple Leaf.

First minted in 1988, the Platinum Maple Leaf is the official platinum bullion coin of Canada and is considered one of only two standards as far as platinum bullion coin investment vehicles go (the other one is the American Platinum Eagle).

The main advantage of the Platinum Maple Leaf over the American Platinum Eagle is the coin's premium — the additional value attached to a bullion coin over CME spot prices.

Canadian Platinum Maple Leafs command a much lower premium in the retail market than Platinum Eagles. And that's generally because American Platinum Eagles also carry a significant numismatic value, due to lower production and limited quantities.

Platinum Maple Leafs are sought after by plenty of collectors, but the value of these coins is largely based on the metal content.

Being one of the standard platinum bullion coin investment vehicles with a relatively low premium over CME spot prices, the Canadian Platinum Maple Leaf is the best option for investors who look to leverage rising prices through direct exposure to the physical metal.

Canadian Maple Leafs can be bought through major dealers such as Bay Precious Metals. Bay Precious Metals is a subsidiary of Coins 'N Things of Bridgewater, Massachusetts, which is the largest wholesale vendor of gold in the U.S.

So, the company is not a fly-by-night operation. But there's a catch: It only sells to retail customers through eBay.

If you would rather not buy precious metals that way, there are other online dealers like APMEX and JM Bullion, both of which have similar prices.

There are also a handful of smaller dealers, like Golden Eagle Coin and Money Metals Exchange.

If dropping over $1,000 on a physical platinum investment is too much for you, Bay Precious Metals also offers a decently priced one-tenth-oz. platinum coin.

The Manx Noble is a platinum bullion coin minted by Pobjoy Mint. These coins are legal tender in the Isle of Man, but they do not have a fixed face value. Instead, like the South African Gold Krugerrand, they are legal tender to the value of platinum content.

Generally, fractional bullion coins (1/20 oz., 1/10 oz., 1/4 oz., and 1/2 oz.) command a much higher premium than their full, 1-troy-oz. counterparts. And generally speaking, the smaller the weight, the higher the premium over CME spot prices fractional bullion coins will command in the retail market.

Platinum at Home

Of course, there's always a level of risk in buying physical bullion. As I said, it could be a challenge to liquidate it later on.

A local coin and bullion shop might buy some platinum from you. But it may pay to make sure you have a buyer lined up before any large investment.

A much better way to get leverage over physical platinum is simply through one of the ETFs that trade the metal.

ETFS Physical Platinum Shares ETF (NYSE: PPLT) is the best-traded and most appropriate ETF for investors who want to buy into platinum.

plat etf

The wide range of companies this ETF covers aims to give investors returns that are equivalent to the actual movements in platinum prices.

Another way to leverage rising platinum prices is through mining stocks. Among the largest publicly traded platinum producers are Anglo American Platinum and Impala Platinum Holdings.

Both of these companies mainly trade on the South African JSE Limited. However, they also have ADRs, which are easier for American investors to buy and sell:

  1. Anglo American Platinum (ADR) (OTC: ANGPY)
  2. Impala Platinum Holdings (ADR) (OTC: IMPUY)

Another stock to consider is Sibanye Gold Limited (NYSE: SBGL). Sibanye just acquired Stillwater Mining Company, the only U.S. producer of platinum and palladium, and the largest primary producer of platinum other than South Africa and Russia — a strong combination in today's precious metals market.

Investors should be aware that platinum prices can be quite volatile. The 70% increase in platinum between August 2007 and February 2008 was followed by a drop in prices just as impressive. As with any commodity, anything could happen.

So, it would be wise to always use stop-losses to hedge against significant losses when you buy equities and to sell on any significant gains immediately.

But right now, as you're reading this, this is the best time to take advantage of rising prices.

Renewed fears of a slowdown in U.S. economic growth, combined with a global supply deficit and a market that's hungry for recession-inverse assets, provides strong support for investment in platinum.

Platinum is the precious metal of the day.

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