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Last Updated on: 23rd November 2022, 03:36 pm
While gold and silver have long been valued as precious metals, the concept of investing in platinum is relatively new. With characteristics of both a precious and an industrial metal, platinum is now one of the rarest and most sought-after metals in the world.
Here is a guide for you to get started on your journey of investing in platinum bullion.
Table of Contents
Platinum 101 for Investors
Platinum is a metal that has several industrial applications and is rarer than other precious metals like gold and silver. According to the US Geological Survey, platinum is valued for its wear and tarnish resistance characteristics. It is also distinctive for its resistance to chemical attack, excellent high-temperature characteristics, and stable electrical properties.
Where is platinum produced?
South Africa, Russia, Canada, and Zimbabwe are some of the world’s top producers of platinum, but the majority of platinum comes from South Africa and Russia. Accordingly, the state of South Africa and Russia’s political situations heavily affect the price of platinum.
How is platinum used?
Platinum is primarily used in autocatalysts of vehicles to reduce emissions in diesel engines. It is used secondarily in the chemical, jewellery, and electronics industries. Platinum prices also depend on the demand of these industries.
Global uses of platinum group metals in 2020; Source: Natural Resources Canada
How much does platinum cost?
Due to its rarity, platinum has historically maintained a higher price than gold and other precious metals. However, the price of platinum changes quickly depending on:
- Geopolitical events
- Events within industries that require platinum in their production
- Demand for products or parts made from platinum
- The strength of the US dollar
Given the precarious nature of these platinum price drivers, the price of platinum has a history of being volatile compared to other precious metals. Below, the chart depicts the history of monthly platinum spot prices in North America since 2011.
For more information on the uses, current price, and historical price of platinum, take a look at our live platinum price page.
Why choose to invest in platinum?
Investors may choose platinum as a long-term investment for its following characteristics:
- Rarity. The rarity of platinum gives it long-term value. It typically maintains a higher price than gold and other precious metals. It also offers protection against inflation (since there is no way to print more of it).
- Practicality. Platinum is important to the production of electronics and vehicles, and these industries are constantly growing.
- Potential for environmentally-friendly uses. Its potential to reduce gaseous emissions may make it more valuable to eco-conscious industries and investors in the future.
Why invest in platinum bars and bullion via a self-directed IRA?
A self-directed IRA allows you to invest in various unconventional assets including precious metals. To invest in platinum for retirement, you should use a precious metals IRA (aka gold IRA), the self-directed IRA for precious metals. Precious metals IRAs have tax benefits like conventional IRAs. For more information, read our Complete Gold IRA Guide.
Platinum in a precious metals IRA offers the opportunity for substantial returns due to its rarity, practicality, and potential for environmentally-friendly uses. Its potential for long-term returns also offers protection from inflation. You can take a further look at the benefits of investing in IRA-approved platinum here.
Risks of investing in platinum bars
Every investment comes with some risks. Since the price of platinum is so volatile, it is a riskier investment than other precious metals.
To mitigate risks, investors should be aware of the following drivers of platinum price.
- Geopolitical events. Any major event in countries that produce platinum will have an impact on the platinum market. For example, the war between Russia (a major international platinum producer) and Ukraine spiked platinum prices to over 1,150 USD per ounce in early 2022.
- Events within industries that require platinum in their production. Any major event in top platinum industries will also impact the platinum market. For example, Volkswagen’s emissions scandal in 2015 sparked distrust in the automobile industry making platinum prices plummet.
- Demand for products or parts made from platinum. As demand for platinum products or parts changes, the price of platinum will change accordingly.
- The strength of the US dollar. A stronger US dollar will encourage platinum producers to mine more platinum. A weaker US dollar will drive up the value of platinum.
How to invest in platinum via a self-directed IRA
To invest in platinum via a precious metals self-directed IRA, you must first select an IRA custodian. Custodians must be approved by the Internal Revenue Service (IRS).
Next, you should choose a precious metals dealer. To help you narrow down your search for the best dealers, you can take a look at our list of top-rated gold IRA companies, some of which offer a variety of platinum bullion and coin options.
The next step is to choose which platinum products you want to buy. The IRS only approves select platinum bars and coins that meet certain fineness requirements. All platinum coins and bars must have a fineness of .9995 or greater to be eligible.
The best-known IRS-accepted platinum coins include:
- American Eagle Platinum bullion coins
- Australian Koala Platinum coins
- Canadian Maple Leaf Platinum coins
- Isle of Man Noble coins
- South Africa Platinum Krugerrand coins
- Austria Vienna Platinum Philharmonic coins
The IRS also accepts platinum bars and rounds produced by a NYMEX or COMEX-approved refinery or national government mint, meeting minimum fineness requirements.
Finally, you must store your platinum in a depository. Once you have a custodian, dealer and depository, your transaction can be completed.
Here are some frequently asked questions about investing in platinum and the details of investing in bars and bullion via self-directed IRAs.
Is platinum a good investment?
Choosing whether or not platinum is a good investment is up to you and your personal investment goals. To judge whether it is a good fit for your portfolio, we recommend consulting with a financial professional and doing your research about platinum investments. Consider the risks of platinum investments while making your decision.
Should I invest in platinum or gold?
While gold has a long history of being a valuable asset, platinum has lots of potential as both a precious metal and an industrial metal. Whichever metal’s characteristics are most important to your investing strategy will help you determine where you want to invest.
What other kinds of precious metals can I invest in my self-directed IRA?
In a precious metals IRA, you can invest in gold, silver, platinum or palladium. You can find more details about specific IRS-approved coins and bars on our Precious Metals Allowed in an IRA page.