Whenever we hear the words “precious metal investment”, our minds are drawn to materials such as gold and silver. After all, gold is renowned as a veritable safe-haven in the international investment markets, whilst silver is a similarly secure store of wealth that also offers tremendous functionality.
Arguably the most precious metal of all is platinum, which shares similar investment properties to gold and silver and is becoming increasingly popular amongst traders. As a result of this, central banks across the globe are being encouraged to add platinum has a second reserve, as this provides greater fiscal stability and additional security in instances where gold is exposed to significantly higher risk.
We’ll explore this further in the article below, whilst asking what opportunities platinum provides to investors in the current climate?
The Rise of Platinum and its Core Investment Advantages
According to the International Monetary Fund (IMF), platinum certainly satisfies the criteria for inclusion as a central bank reserve asset, and there are a couple of standout reasons for this.
Firstly, platinum offers similar diversification benefits to that of gold, enabling central banks to achieve superior risk-adjusted returns and provide sustained stability during times of economic tumult.
Secondly, platinum also has the potential to expedite the economic recovery in the event of a recession or financial crisis, thanks largely to its price performance and the numerous characteristics that it shares with gold.
More specifically, platinum tends to perform exceptionally well in less favourable economic conditions, while it’s firmly established as one of the top performing assets since the turn of the century.
Between January 2000 and the end of 2009, the price of platinum increased from just $350 to a whopping $1,250. The price of the asset also peaked during the great recession, highlighting its robustness during times of austerity.
From an investor perspective, there’s also a limited supply of platinum on the global market, even though more has been discovered of late. Not only this, but 90% of the material is mined in South Africa and Russia, so it’s unlikely that supply will ever outstrip demand in the future.
This is especially true with platinum now widely coveted in both industrial and investment spheres, in a similar way to how silver evolved around eight years ago. This only adds to the value of the asset, with a healthy demand underpinning consistently high prices.
What Opportunities are Available to Investors when Trading Platinum?
If we assume that platinum is adequately liquid to qualify as a reserve asset, then it certainly offers value to investors in the modern age.
It may be particularly alluring to forex traders, particularly those who are looking to create a more balanced portfolio that provides a slightly more secure store of wealth.
After all, whilst the derivative nature of currency makes it possible to profit from forex trading in a depreciating market, a recession can send values plummeting and trigger an increase in demand for precious metals. So, if you have an existing store platinum, you’ll be well-placed to diversify successfully as the economic climate shifts.
What’s more, online trading platforms like Oanda enable you to diversify your trades from a single platform, creating the type of easy-to-manage portfolio that optimises returns.
Whether you’re trading forex or another type of derivative, there’s no doubt that platinum offers a huge opportunity to diversify in an increasingly uncertain geopolitical climate.