Investing in Platinum: What to Consider?
Similar to copper, platinum is widely used in a variety of daily products. While not as popular or important as gold to the world economy, platinum is still a popular choice for many traders looking to invest in a practical commodity with potential upside.
Over the last several years, platinum has gained popularity with both beginners and more experienced traders. However, it still lags behind gold, silver and copper, which have become household names and enjoy unprecedented hype by media outlets and financial experts.
WHO SHOULD INCLUDE PLATINUM IN THEIR PORTFOLIOS
Commodity traders: As mentioned previously, platinum (ticker symbol XPT) is becoming very popular with many traders. In fact, some commodity enthusiasts have taken to increasing the percentage of platinum in their portfolios. Like all commodities, platinum is paired in value with the US Dollar. The pair is called XPTUSD.
Beginner investors: Platinum is potentially easier to understand than more complicated financial assets, for the simple reason that it has many real-world applications and is influenced greatly by major events that can be tracked easily.
Experienced investors: Investors who possess wisdom and experience with commodity trading should seriously consider platinum as a target. This is a stark reminder of the importance of platinum as a tradable commodity, as many investors prefer the calm waters of more traditional commodities and financial assets, for reasons that do not carry much merit.
Diversification seekers: Platinum can be a great method of diversification for traders who feel that they are overly focused on currencies, stocks or indices. It should not be overlooked if a trader is already considering gold or silver as an investment opportunity.
WHAT DRIVES THE PRICE OF PLATINUM?
Production problems: Almost 70% of the world’s platinum supply is located in South Africa. The country is considered somewhat stable, despite ongoing issues revolving around labour and social unrest. It is prudent to track these issues in South Africa when investing in platinum. A sudden strike by a union could potentially lead to lower supply that could drive up prices.
Gold value: There is only so much money to go around. For some investors, an investment in platinum could indicate less available resources for investment in gold. For this reason, there is often a correlation between the value of gold and the value of platinum.
Demand: Much like any other financial asset, an increase or decrease in platinum demand could possibly influence value in the short and long term. As long as all things remain equal, a higher demand can lead to higher prices.
Economic policy: Government decisions can have a major impact on the value of a commodity. It is important to track business reports, press conferences, the news and meetings held by central banks. All of these have ramifications on not only platinum, but the market as a whole.
PLATINUM: THE SISTER OF GOLD
Many traders often assume that platinum and gold are similar in terms of their use. This couldn’t be further from the truth. Gold has historically been used by both governments and independent traders as an anchor from which to conduct their business. For governments, currency used to be backed by gold and sometimes silver. This was known in America as the gold standard. For traders, gold is often used as a safe haven asset. The ‘safe haven’ term is used to describe a trading action conducted by a trader when they are experiencing uncertainty in the markets due to a variety of reasons. Gold is less susceptible to government action. Platinum however, does not enjoy the same status.
To this day, platinum has not received the respect it deserves. While considered promising by some investors, it is not a focal point for many of them. But this doesn’t mean that platinum does not offer opportunities.
HISTORY OF PLATINUM
Platinum is believed to be first discovered in 1200 BC by Egyptians. It wasn’t mentioned in historical records in Europe until 1557. Much like other commodities, the wide range of use came much later, when technology was advanced enough for more contemporary applications. Platinum plays an important role in modern society, and can be found in vehicles, jewelry and is used for scientific experiments. Platinum can also be found in wires, medical equipment and is used to create certain chemicals.
CONCLUSION: IS IT TIME TO GO PLATINUM?
The future of platinum is impossible to predict. While it may continue to gain importance, the fickle ways of the markets and the fast pace of technology could make it obsolete. This doesn’t mean that platinum should be disregarded. Traders interested in platinum will find that it could potentially play an important role in their portfolio and investment strategy.
Time will tell regarding the performance of platinum and its fate. The only certainty is that potential exists. A sharp trader with their ear to the ground could possibly take advantage.
*This content is for information and educational purposes only and should not be considered investment advice or an investment recommendation.
*Past performance is not an indication of future results. All trading carries risk. Only risk capital you’re prepared to lose.
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