How Platinum Can Diversify an Economic Portfolio and Hedge Against Inflation

Platinum is a chemical element and member of the platinum group of elements. Most metals in the platinum group are prized for resilience to corrosion and relative imperviousness to high temperatures. In fact, platinum is regarded as a noble metal due to its resistance to oxidation and corrosion.

Noble Metals and Base Metals
Palladium, platinum and gold are all noble metals and generally resistant to aging. Base metals like zinc and iron, on the contrary, do not age very well. Nobel metals are popular for other reasons, however. Platinum has numerous industrial applications and aesthetic uses. For example, platinum is used predominately in the catalytic convertors of automobiles, yet platinum is making inroads into jewelry stores, the dentist’s office, thermometers and even the hands of collectors.

Platinum as Precious Metal
A precious metal is a metallic element of high economic worth. Precious metals, such as platinum, are often ductile and contain a rich lustre. In the past, precious metals took the place of fiat paper in large economies. Today, however, precious metals like gold, silver and platinum are viewed as investments and hedges against unstable local currencies. Platinum is actually the most widely transacted precious metal in the world. In other words, investors have determined that platinum is a worthwhile store of value and investment opportunity.

Platinum Bullion
Platinum bullion has an ISO currency code of XPT. The International Standards Organization characterizes references and currency designations for global banks and businesses. An ISO currency code is an invaluable tool for navigating hedge funds and international exchange rates. The fact that platinum holds a standalone ISO currency code bodes well for its intrinsic and long-term store of value.

Renowned watchmakers like Patek Philippe and Rolex employ platinum to create limited edition watches. Watchmakers are said to relish platinum because of its distinctive lustre and resilience over time. (1) Interestingly, precious metal trade publications argue that small surface scratches to unalloyed platinum enhances the inherent value of platinum. Jewelers and collectors deem these small surface scratches beauty marks or patinas.

Platinum: Precious Metal of Tomorrow?
Although platinum has historically been more volatile than gold, platinum has recently been vindicated as an excellent store of value and up-and-coming hedge investment. Precious metal insiders contend that during robust economic stability and fiscal growth platinum’s value can be twice that of gold’s value.(2) Unfortunately, platinum may also plummet in price during periods of low growth.
Monex Live Platinum Prices

The reason low growth frequently equates to lower platinum prices is that platinum has many industrial applications. As the economy and growth stagnate, industry has less reason to vehemently demand platinum. Thus, the law of supply and demand dictates a downturn in the price of platinum as economies become febrile and demand less platinum to sustain growth. Interestingly, investors can take advantage of these vicissitudes in platinum’s value by broadening their investment portfolio to include economies around the globe.

Portfolio Diversification
Platinum is included as a hard asset invaluable for portfolio diversification. Financial experts currently contend that approximately 15% of one’s investment portfolio should entail hard assets and precious metals like platinum. Undoubtedly, investing in precious metals will bolster and balance one’s investment portfolio.

Factors like currency instability, domestic uncertainty and runaway inflation can weaken a portfolio based exclusively on domestic currency and market stability. Platinum bars and coins molded from precious metals are a way to hedge against the potentially dangerous market fluctuations in an increasingly global economy. (3) Especially during relatively high-growth periods, platinum is a superb store of value and hedge against government mismanagement and runaway inflation.

Platinum Bars
A platinum bar is also referred to as a platinum ingot. By whichever name one decides on, a standard platinum bar is approximately ten ounces of nearly unalloyed platinum. Most platinum bars are .999 purity and up, according to Platinum coins may be purchased in American Eagle embroidery or Canadian Maple Leaf designs. These coin’s most popular size variations are one-ounce bars and half-ounce bars. (3) Coins made from precious metals are the perfect bridge between economic shrewdness and a numismatist’s sweet dream.

Price of Platinum
On June 3rd platinum closed at $1,494. (3) Platinum’s annual high-point was nearly $1,750 in early February. In spite of platinum’s relative instability when viewed from a long-term perspective, platinum is considered both rare and prestigious as a precious metal. Mine production only culls five million troy ounces annually. (4) Gold miners dig up approximately 85 million troy ounces of gold per year. The relative scarcity of platinum today ensures platinum’s high store of value far into the future. Platinum is traded on the New York Mercantile Exchange due to platinum’s staying power and comparative market scarcity.

Platinum’s All-time Record
In spite of the fact that supply and demand coupled with relatively scarce amounts of platinum make the precious metal both somewhat unpredictable and highly promising, platinum has frequently been valued higher than gold. In fact, platinum retailed at over $2,250 per troy ounce in early 2008. Logistical problems in South African mines at the time curtailed the cultivation and supply of platinum vis-a-vis eager investors and collectors. Platinum is certainly here to stay considering that the coin is currently minted in Estonia.

Swiss Banks and More
Many Swiss banks have assumed the habit of creating and maintaining platinum accounts. These accounts allow account holders to easily buy and sell platinum like any other currency proper. A platinum account differs from a regular currency-based account in that the former is based on a claim on the asset rather than currency stored on site. Nonetheless, platinum and other precious metals are clearly more impervious to market fluctuations and runaway inflation compared to fiat paper, especially considering recent debacles with respect to the European Union’s Euro and austerity measures.

Northwest Territorial Mint
The Northwest Territorial Mint values platinum ahead of gold, palladium and silver. (5) Although gold has recently experienced an uptick in value, gold’s current asking price of $1,400 is historically tepid. Platinum, on the contrary, is riding the crest of short and long-term value increases.

The time to invest in platinum is right now. Platinum is used as a hedge fund in the United States, Japan and Europe, according to Platinum Asset Management. (6) Platinum is currently experiencing a high, but platinum’s value is in many respects entwined with uncertain supply characteristics and industry need. Platinum, however, makes a serviceable hedge and safeguard against market downturns and inflation. Platinum’s existence on the New York Mercantile Exchange is a testament to platinum’s staying power.

Works Consulted

How Platinum Can Diversify an Economic Portfolio and Hedge Against Inflation
5 (100%) 11 votes