The word platinum is always associated with items of high value: platinum cards, platinum memberships, the list goes on. As it turns out the high-value nature of platinum also extends to investments.
However, can platinum act as a hedge against inflation? Based upon its price history, platinum can, like gold, hedge against inflation.
Why Is Platinum a Good Hedge Against Inflation?
Everyone knows that when inflation is predicted or strikes, investors shift towards gold. But in recent decades, investors have found that platinum too also acts as a strong hedge against inflation.
It has been observed that the gold price is secure and increases gradually, as does the platinum price. During escalating inflation, investors always look for hard assets other than equities for a refuge, and platinum provides such an allure. The price of platinum has increased in recent weeks, with the metal reaching highs above $1,000/oz. This is in light of many contributing factors, including demand from the automotive industry.
Investors realize that the automotive industry plays a big part in moving the price of platinum because platinum is a crucial element in reducing the carbon footprint to produce battery-electric vehicles.
With the automotive industry looking to produce more sustainable transportation options, investors are looking to hard assets like platinum, whose forecasts for demand are strong. Thus, due to its industrial usage, platinum looks like it will remain a good investment.
The Benefits of Investing in Platinum
Over the past 40 years, platinum has been priced at a discount to gold for a sustained period. At times, the benefits of investing in platinum far outweigh that of other precious metals. Because platinum has a lower correlation to the performance of traditional assets, it performs well during periods of economic recovery. With the pandemic situation expected to be sustained globally within the next few years, there is scope for platinum to strengthen in the near future.
Platinum also offers a low-risk investment opportunity for investors, especially considering the industrial usage of precious metals. Furthermore, platinum has extensive applications in innovative technologies, especially in the development of tech. The associated demand growth and prospects of platinum are not currently reflected in its price.
Conclusion
Investors know that during economic instability, people always seek out precious metals to store as a hedge against inflation. So is platinum a hedge against inflation? It most definitely is, and rightly so. With its widespread industrial, technological applications, and steady pricing, platinum has continued to perform well against other assets classes and is proving itself to be an excellent store of value.
