Five Reasons to ‘Go Platinum’



Five Reasons to ‘Go Platinum’

Five Reasons to ‘Go Platinum’

When it comes time to making a purchase, clients often ask me which metals to invest in. Most often, they are referring to either gold or silver. My answer to their question always includes allocating a portion of the investment into platinum as well. Oft forgotten and misunderstood, platinum represents a very attractive alternative investment opportunity as part of a well-balanced metals portfolio (there’s your first hint). Here are five reasons why you should strongly consider going platinum:

#1 – DIVERSE INDUSTRIAL APPLICATIONS

Due to its remarkable resistance to corrosion, its superior ductility and high melting temperature (1768 degrees Celsius) platinum is used primarily in catalytic converters (almost all fuel burning vehicles have one of these), laboratory equipment, electrical contacts, electrodes, dentistry equipment as well as jewellery. This diversity of applications guarantees consistent demand for the shiny stuff.

#2 – SCARCITY OF OCCURRENCE

Found almost exclusively in South Africa and Russia, platinum is considered a scarce resource. Coupled with the social and economic volatility of these two nations, the PT price can experience strong swings. For example, in the seven days following the August 16th 2012 massacre of 34 South African platinum miners by local security forces, known as the Marikana Massacre, the commodity’s price rose by $100/oz or 7%.

#3 – PORTFOLIO DIVERSIFICATION

One of the principle reasons to invest in precious metals in the first place, is to achieve actual diversification within one’s investment portfolio. Since precious metals have an inverse correlation to the stock market, they are an excellent hedge. If you then apply this basic concept to the metals, by owning gold, silver and platinum, you are achieving diversification amongst the metals themselves. Although over the long-term, precious metal prices tend to correlate, because it is subject to different market conditions, the platinum price has been known to break away from gold and silver. Hence owning PT will add further stability to your overall investment portfolio.

#4 – GOLD VS. PLATINUM RATIO

If you’ve ever been shopping for an engagement or wedding ring, you probably noticed that the platinum rings are significantly more expensive than their gold counterparts. That’s in part because platinum has historically traded at a premium to gold. In fact, since 1988, one ounce of platinum has been more valuable than one ounce of gold over 90% of the time. However, we’re currently in a period when the opposite is true; gold is trading at a premium to platinum, but almost as expected, platinum is closing the gap quickly and the gold/platinum ratio is returning to the historical mean. Within the last 60 days, the gold premium above platinum has already shrunk from $360/oz to $225/oz, and is closing almost daily. If history tells us anything, the platinum price will once again surpass the gold price, making PT a near to mid-term buying opportunity.

#5 – COST EFFECTIVE

As far as acquiring physical bullion goes, getting your hands on some platinum doesn’t have to be an expensive undertaking. Product premiums for platinum bars are comparable to gold, with one-ounce platinum bars costing approximately 3.5% above the spot price and ten-ounce bars approximately 2.25%. This is significantly less than physical silver premiums. SWP carries the world-renowned PAMP Suisse platinum bars for anyone who may be interested.

Mark Yaxley
Head of Operations and Client Services
Strategic Wealth Preservation Ltd.
email: my@swpcayman.com
Phone: (345) 640-2111



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