Investing in Platinum vs Gold

Are you seeking to diversify your investment portfolio and capitalize on the potential for financial growth? Delve into the fascinating world of precious metals and discover the benefits and challenges of investing in platinum vs gold. This comprehensive guide will help you make an informed decision on which precious metal best suits your investment goals.

Should You Invest in Gold or Platinum?

  • Understanding the characteristics of platinum and gold is essential for informed investment decisions.
  • Market performance, liquidity, price trends and volatility must be compared to determine which metal is a better investment.
  • Factors such as portfolio diversification strategies, storage solutions and tax implications should also be taken into account when investing in precious metals.

Understanding Platinum and Gold

Illustration of platinum and gold bars

Platinum and gold are precious metals that investors may employ for financial gain, such as hedging against inflation. The platinum vs gold debate is often centered around their respective values and applications. Platinum is a scarce, durable, and weighty metal with industrial applications, including catalytic converters, and a greater resistance to abrasion than gold. On the other hand, gold is a renowned valuable metal with an extended history of worth, employed as a store of wealth and a safeguard against inflation.

Presently, platinum is around half the price of gold, with platinum prices being influenced by factors such as industrial demand, mine production, and supply restrictions. Gold is currently trading at $1,801.30 per ounce, showcasing gold’s price compared to platinum, which is trading at $976.20 per ounce. The primary demand for gold predominantly originates from jewelers and investors, while the World Platinum Investment Council provides valuable insights and data on platinum investment trends and market dynamics.

Platinum Characteristics

Platinum is a rare, hard, and heavy metal that is renowned for its industrial uses and for its higher resistance to scratches compared to gold. Its value can be significantly affected during an economic crisis, as industrial demand may decrease. The exceptional quality of platinum jewelry, being virtually scratch-proof, is the primary reason for it being more expensive than gold jewelry. Gold is often seen as a reliable investment during times of financial instability. It is known to be a safe haven asset..

Choosing between platinum and gold investments requires a careful evaluation of your financial goals, risk capacity, and an understanding of the advantages and disadvantages of each metal. Platinum is noted for its high density and malleability, rendering it highly valuable in industrial applications.

Gold Characteristics

Gold has been perceived as highly valuable for centuries, serving as a medium of exchange for numerous ancient societies. It is a precious, yellow metal that has been held in high esteem for millennia due to its rarity, beauty, and the vast array of uses it can be put to. Gold’s scarcity, aesthetic appeal, and durability render it valuable. Additionally, it is an effective store of value that is not bound to any government, serving as a buffer against inflation and currency devaluation.

Gold serves as a safeguard against inflation in currency due to its stability. It is a renowned precious metal with a long-standing history of worth, utilized as a repository of wealth and a safeguard against inflation.

Comparing Platinum and Gold Investments

Photo of gold and platinum price trend chart

A comparison between platinum and gold investments necessitates a thorough evaluation of their market trends, liquidity, price movements, and volatility. Here are some key points to consider:

  • Platinum had a higher price than gold for the majority of years until 2015. This trend changed in 2015 when platinum prices dropped below gold’s.
  • In 2008, when supply shortages caused values to increase, platinum reached a peak of more than twice the price of gold.
  • During the oil crisis of the ‘70s, platinum and gold prices surged as investors sought out safe-haven assets. This shows that these commodities can perform well even in times of economic instability.
  • When recessions occurred and industrial activity decreased, platinum experienced a more significant drop in value than gold.

Platinum is significantly cheaper than gold. Currently, it’s price is around half of the value of gold. Research has indicated that gold has been observed to have a higher price per ounce than platinum over a period of 30+ years. Economic factors, supply and demand dynamics, market indicators, and the growth of industries that heavily rely on platinum are all factors that influence the price trends of platinum and gold.

Market Performance and Liquidity

Gold possesses a larger market size and higher liquidity compared to platinum, which can command higher prices under supply shortages but offers fewer investment avenues. Gold has a higher level of liquidity than platinum, as it is subject to a larger volume of daily trading globally. Supply constraints can have a notable influence on platinum’s trading price. When the supply of platinum is restrained, meaning there is a limited quantity available in the market, the demand for platinum can surpass the supply. This discrepancy between supply and demand can cause an increase in the trading price of platinum.

Factors such as power cuts in South Africa, war in Ukraine, feeble mine activity, and augmented demand for hybrid cars and other industries can contribute to supply constraints and consequently affect platinum’s trading price. Investment options for platinum and gold include purchasing bullion, investing in ETFs, and buying stocks of mining companies.

Price Trends and Volatility

Platinum has traditionally commanded a higher price than gold, though its value is more prone to fluctuation. Conversely, gold has demonstrated more consistent value and demand.

Some factors that influence the price trends of platinum and gold include:

  • Economic factors
  • Supply and demand dynamics
  • Market indicators
  • The growth of industries that heavily rely on platinum

Platinum is typically more volatile than gold.

Financial advisors generally suggest focusing on long-term investing that is in accordance with one’s investment objectives and timeline. Gold and platinum ETFs have exhibited diverse performance trends historically, with platinum being more volatile due to its smaller market share and lower trade volume, while gold has a longer-standing credibility and a wider range of applications.

Pros and Cons of Investing in Platinum and Gold

Illustration of platinum and gold investment pros and cons

The decision to invest in platinum and gold comes with pros and cons, shaped by factors such as market stability, liquidity, industrial demand, and cost, which contribute to their suitability as part of an investment portfolio. Platinum is more scarce than gold, and its industrial application renders it more valuable. Additionally, platinum is more resilient to market fluctuations, thus making it a more secure investment. However, it is not as widely traded or regulated, resulting in higher bid-ask spreads and presenting access difficulties for investors.

Gold, on the other hand, is a stable and liquid asset, providing a hedge against economic uncertainty. However, it may be overvalued, and unlike stocks and bonds, it lacks dividend yields. Considering these pros and cons can help investors make informed decisions on the best precious metal investment for their specific needs and goals.

Platinum Investment Pros and Cons

Platinum offers potential for higher growth but comes with increased price volatility and lower liquidity compared to gold. It is more challenging to purchase and dispose of due to its limited investment options and higher bid-ask spreads. However, its scarcity and industrial applications make it more valuable than gold, and its resilience to market fluctuations makes it a more secure investment.

When considering platinum investments, it is essential to weigh the potential benefits against the drawbacks, such as its limited market access, price volatility, and the potential for decreased industrial demand during economic downturns.

Gold Investment Pros and Cons

Gold is a well-known precious metal with a long history of value, used as a store of wealth and a hedge against inflation. It is a stable and liquid asset, providing a hedge against economic uncertainty. Gold prices often increase in times of inflation, making it a wise investment in any economy. Furthermore, investors tend to prefer gold during periods of financial market ambiguity.

However, gold may be overvalued, and unlike stocks and bonds, it lacks dividend yields. As with any investment decision, it is crucial to weigh the pros and cons of gold investments based on individual risk tolerance and goals.

Investment Strategies for Platinum and Gold

Photo of diversified investment portfolio

The decision to invest in platinum and gold requires thoughtful consideration of strategies such as portfolio distribution and diversification via ETFs and stocks. Incorporating both metals into an investment portfolio allows one to reap the advantages of platinum’s growth potential while still preserving gold’s steadying effect in times of market volatility. It is important to correctly diversify investments into various hard assets. This will provide exposure to the catalysts which drive their respective demand..

Physical offshore gold storage is often suggested for long-term asset preservation for individuals with high net worth. This choice can provide better security of their wealth. When allocating investments between platinum and gold, one might consider investing in:

  • Physical platinum or gold
  • Taking into account factors such as storage and insurance
  • Assessing one’s goals, risk tolerance, and investment strategy to decide the suitable allocation between the two precious metals.

Portfolio Allocation Recommendations

Experts recommend allocating between 5-10% of an investment portfolio to gold and 1-5% to platinum, depending on individual risk tolerance and objectives. When determining portfolio allocation for platinum and gold, investors should take into account factors such as:

  • Portfolio diversity
  • Liquidity
  • Risk tolerance
  • Investment purpose
  • Budget

Allocating a portion of your portfolio to gold can offer potential advantages and diversification. Here are some options to consider:

  1. Allocate 5% of your portfolio to gold for a marginally increased exposure to its potential advantages.
  2. Allocate 10% of your portfolio to gold for a greater diversification.
  3. Consider adding platinum to your portfolio along with gold for the greatest diversification.

The precise performance divergence between different portfolio allocations may vary depending on other factors and market conditions.

Diversifying with Exchange Traded Funds (ETFs) and Stocks

Diversifying investments by considering ETFs and stocks related to gold and platinum mining and production companies can provide additional opportunities for growth and risk management. Investment experts suggest investing in gold or platinum ETFs. This can be done through a brokerage or any suitable investment app, similar to that of trading stocks and bonds..

Some leading gold and platinum exchange traded funds include:

  • GraniteShares Platinum Trust (PLTM)
  • iShares Gold Trust Micro ETF (IAUM)
  • SPDR Gold Shares (GLD)
  • iShares Silver Trust (SLV)

Gold and platinum ETFs have exhibited diverse performance trends historically, with platinum being more volatile due to its smaller market share and lower trade volume, while gold has a longer-standing credibility and a wider range of applications.

Purchasing and Storing Physical Platinum and Gold

Illustration of purchasing physical platinum and gold

One way to invest in gold and platinum is to purchase physical bullion from a trustworthy dealer and ensure safe storage. Storage options for physical platinum and gold include safe deposit boxes at financial institutions and safes in private residences. Several reliable dealers for purchasing gold coins and bars include JM Bullion, American Precious Metals Exchange (APMEX), and Orion Metal Exchange. One may confidently acquire platinum bullion from BullionMax, APMEX, and JM Bullion.

When procuring gold coins, bars, or platinum bullion, it is crucial to consider factors such as weight, purity, and reliable dealers to guarantee a sound investment. Additionally, investors should take into account storage solutions and insurance when dealing with physical precious metals.

Buying Gold Coins and Bars

The purchase of gold coins or bars necessitates careful consideration of factors like weight, purity, and a trustworthy dealer to ensure a solid investment. Some of the most highly respected precious metal dealers for procuring gold coins and bars are:

The assay test, acid test, standard measurements, and the water displacement test are the methods that can be employed to ascertain the weight and purity of gold coins and bars. Available gold coins for purchase as an investment include the American Gold Eagle, American Gold Buffalo, South African Gold Krugerrand, and Canadian Gold Maple Leaf. Investment-grade gold bars available for purchase include Credit Suisse Gold Bars, Johnson Matthey Gold Bars, Perth Mint Gold Bars, Valcambi Gold CombiBar, Engelhard Gold Bar, Argor Heraeus Gold Bars, and PAMP Suisse Gold Bars.

Acquiring Platinum Bullion

Purchasing platinum bullion requires careful examination of aspects such as weight, purity, reputable dealers, and considerations for safe storage and insurance. Some of the most reputable places to purchase platinum bullion include SD Bullion, JM Bullion, Provident Metals, APMEX, and OneGold.

The accepted level of purity for platinum bullion is 0.9995. Platinum bullion is typically available in increments of 1 gram, 5 grams, ½ ounce, 1 ounce, 5 ounces, 10 ounces, and 20 grams.

Tax Implications and Considerations

Understanding the tax implications of investing in platinum and gold, including potential tax benefits and IRS regulations, is beneficial. Physical gold gains are taxable as ordinary income if held for one year or less. If held for longer than a year, the maximum tax rate will be 28%..

The tax implications of investing in platinum can vary depending on the specific circumstances and jurisdiction. In general, platinum investments are classified as “collectibles” by the Internal Revenue Service and are subject to capital gains tax when sold. It is advisable to seek counsel from a tax professional for specific guidance on tax implications related to investing in platinum and gold.

Summary

In conclusion, both platinum and gold offer unique advantages and challenges as investment options. Platinum’s scarcity and industrial applications make it a potentially high-growth investment, while gold’s stability and liquidity make it a strong hedge against economic uncertainty. By carefully considering factors such as market performance, liquidity, price trends, and volatility, as well as developing a sound investment strategy, investors can make an informed decision on which precious metal best suits their investment goals and risk tolerance.

Frequently Asked Questions

What is the safest precious metal to invest in?

Gold is the safest precious metal to invest in, offering reliable wealth preservation and limited investment options. Silver, platinum, and palladium may offer higher returns but come with increased volatility.

Will platinum ever be worth more than gold?

Given the fact that gold is currently worth more than platinum and its price fluctuates more often, it is unlikely that platinum will become worth more than gold in the foreseeable future.

Which metal to invest in 2023?

Given the current economic uncertainty, investing in silver in 2023 is a wise choice as it is a reliable store of value.

Can platinum be used as investment?

Platinum can be used as an investment option, offering potential diversification benefits due to its low correlation with other asset classes. It also has intrinsic value and can hold its value over time, making it a suitable inflation hedge. Quality platinum bars and coins are available from bullion providers for investors who wish to diversify their portfolios with one of the world’s most precious and valuable metals.

What are the primary uses of platinum and gold?

Platinum is widely utilized in industrial applications, while gold is employed as an investment and store of value.

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Tim Schmidt

About 

Tim Schmidt is an Entrepreneur who has covered retirement investing since 2012. He started IRA Investing to share his expertise in using his Self-Directed IRA for alternative investments. His views on retirement investing have been highlighted in USA Today, Business Insider, Tech Times, and more. He invested with Goldco.