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What are the Best Tips for Investing in Platinum?

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  • Written By: Jim B.
  • Edited By: Melissa Wiley
  • Last Modified Date: 31 October 2016
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Investing in platinum can be a daunting prospect for the average investor because of its high cost compared to other precious metals like gold and silver. It is also a relatively volatile commodity, meaning that prices tend to rise and fall dramatically in short periods of time. For those reasons, those investing in platinum may want to mitigate their risk by investing in the metal through futures, which lock in the price for purchase, and mutual funds, which can contain many platinum securities. Investors should also understand which industries utilize platinum and focus on these industries to determine when and where to invest.

Understanding the nature of an investment should always be paramount before investors proceed, and so it is with investing in platinum. Investors should be aware that the metal is extremely scarce compared to gold and silver, which are the two other most common precious metals. Simple supply and demand laws indicate therefore that platinum prices should be high, because there is not a lot of it to go around.

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Still, the market prices for platinum can fluctuate wildly depending on overall economic factors. When an economy is doing well, people have the money to spend on platinum, and the price can rise well above even the price of gold. At times when the economy is trending downward, the demand for this pricey precious metal can plummet, sending prices well below gold. As this is the case, those investing in platinum should be aware of the overall economic signs before proceeding.

Taking on the risks involved with investing in platinum can scare away some investors, but there are ways to lessen exposure while still getting the benefits of platinum. A futures contract requires an investor putting down a significant margin payment but also gives him the opportunity to lock in a price before purchasing. Funds that combine different precious metals securities also provide investors the opportunity to become involved with platinum without exposing themselves to the risk of being ruined by one underperforming security.

It is crucial when investing in platinum to know which industries use the metal the most, because increased production by these industries will also mean increased demand for platinum. Nearly half of the platinum produced in the world is used by the auto industry, which uses the metal to make the catalytic converters found on automobiles. Times of strength in the auto industry usually coincide with a boom in platinum demand. Investors should also track the popularity of platinum jewelry, as this is another popular use of this metal.

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