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Platinum Investing

Unlike gold and silver, platinum is not widely thought of as a form of currency. However, the silvery white metal is 35% rarer than gold and is extensively used in the production of jewelry. It also has wide industrial uses including use in catalytic converters to clean noxious gases, and in medical applications such as the treatment of some cancers and as machined components for cardiac treatments.

There are many ways to invest in platinum, and can be used for speculative purposes or as an addition to a long-term growth portfolio. Before considering investment in platinum, it’s worth considering the reasons for doing so.

Low Interest Rates Hurt Savers

The world economy is moving form one crisis to another, and recently governments and central banks have been holding interest rates low in attempts to promote economic growth. Often, savers’ cash in the bank is reducing in its value as interest earned fails to keep pace with inflation.

The precious metals are seen as a store of value against the decreasing value of currency, and also as a hedge against inflation.

Governments Keep Borrowing

Governments around the world keep borrowing money as they try to spend their way out of economic difficulty. Budget deficits are higher now than at any time in the past. Europe is in turmoil, and the United States is not far behind.

An investment in platinum gives the investor a tangible asset that will have value long past the time that governments have fallen over the precipice of debt they are creating.

 

Supplies of Platinum are Limited

As a natural resource, the supply of platinum has a finite life. Just like oil, gold, and silver, reserves are being used up. At some time, supply will fall to a level where demand causes the price to rise even further.

HOW TO INVEST IN PLATINUM

There are several ways to invest in platinum, though these can be divided into either investment in physical or non-physical platinum.

PHYSICAL PLATINUM

Physical platinum comes in many forms. Scrap platinum – typically unwanted jewelry and catalytic converters – can be readily found and sold. More common purchases by investors by investors are bars, coins, and rounds.

Platinum Bars

Attractive to investors because they are easily stored and available in a range of sizes to suit different investor, platinum bars are easily purchased and sold. Their price depends upon the weight and purity of platinum content.

Coins and Rounds

Many of the world’s most prestigious mints produce platinum coins. The US Mint first introduced such coins in 1997 when it produced a Platinum Eagle. The value of platinum coins depends upon the weight and grade of platinum, and also the rarity of the coin.

Rounds are coin shaped, but without the decorative engraving of a coin. Therefore the value of a round is based only on weight and platinum content., and does not have any ‘collector premium’.

NON-PHYSICAL PLATINUM

Including shares of companies that make their profits from platinum, non-physical platinum gives investors indirect exposure to the price of the metal.

Company Shares

The share price of companies that mine for platinum will fluctuate with the price of the metal. However, investors should remember that other minerals and metals will be mined along with platinum, and so such an investment is rarely a pure play on platinum.

Also, the performance of a platinum producer will depend upon other factors, such as cost of production, wages, taxes, and the wider economic and investment climate.

Exchange Traded Funds

The shares of an ETF trade on an exchange just like the shares of ordinary companies. Platinum ETF’s could be based on a range of underlying assets, for example the shares of platinum miners, or on holdings of physical platinum.

INVESTMENT AND TAXATION

For investors, the return made is not simply the difference between purchase and sale price. All investors should be aware of the tax rules applying to their investments in their country. Taxes applicable might include VAT, or sales tax, capital gains taxes and income tax. Anyone buying platinum as an investment should consider his individual tax position before doing so.

 


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Platinum Investing

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