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We all know that the precious metals market has been predominantly ruled by gold and silver, and it is expected to remain this way. However, that doesn't mean that one shouldn't consider investing in platinum group metals as well. Platinum Group Metals (PGMs) have been increasingly sought after by investors while becoming important additions to portfolios. They allow investors to add variety to their portfolio while maintaining additional investment into precious metals.
Since gold is a relatively stable commodity, many investors choose to invest in it as means of wealth preservation. On the other hand, silver is more volatile and is accustomed to higher levels of price fluctuations. This also opens a great opportunity for profits. The increasing interest in PGMs is mostly owed to the price fluctuations observed in recent times.
The platinum group metals consist of platinum, palladium, rhodium with less common metals osmium, ruthenium, and iridium that are categorized based on commonalities found in their physical and chemical properties. Usually discovered as metal alloys, these metals are typically found in the same mineral deposits and all are rarer than gold and silver. The six PGMs together amount to 0.0005 ppm of the earth’s crust.
PGMs are concentrated in certain geographical regions, which affects their price. South Africa holds around 88% of the PGMs worldwide followed by Russia, Zimbabwe, Canada, and the USA. Changes in economic, labour, or political markets, and particularly those in South Africa, have a greater effect on their supply and also their price.
Why should you invest in Platinum? Mined platinum is estimated to be 30 times rarer than gold. Just like silver, platinum’s price is impacted by the jewellery and industrial markets. Platinum is also the most liquid PGM. More than 50% of the demand for platinum comes from China while India is the next contender with highly increasing demand. Platinum is used for electronics like LCDs, hard disks for laptops, etc. Additionally, Fuel Cell Electric Vehicles (FCEVs) are expected to increase the demand for platinum in the future.
Why should you invest in Palladium? Palladium shares various chemical and aesthetic similarities with platinum, which increases its demand for use in the same markets as platinum. These include both the jewellery and industrial markets. 55% of its demand is driven by the automobile industry for use as catalytic converters. Palladium has become a much more popular precious metal recently, due in part to its huge price increase over the last 3-4 years. The palladium price has seen an increase of more than 400%, and the metal is now trading at a higher price per ounce than platinum or gold.
Why should you invest in Rhodium? No mining is done exclusively for rhodium; it is a by-product of platinum or nickel mining. Most of these mines are located in South Africa or Russia (with Norilsk being the main one). It is extremely rare, and 80% of it is used in the automobile industry in order to make catalytic converters that meet environmental emissions requirements. The gaps in demand and supply of the metal are vast, and the metal is currently seeing demand far outweighing supply. This has seen the price of the metal skyrocke from around $1,000/oz to highs of almost $30,000/oz.
For precious metals investors, platinum group metals are becoming increasingly popular and necessary to hold in their portfolios. This is due to the price fluctuations, and the movements these markets have seen recently in terms of demand for the metals.