Investors who want to diversify their portfolios may choose to invest in precious metals. Gold and silver are the most popular among these precious metals with high economic value. But besides those, palladium and platinum are also valuable because of their industrial uses and higher scarcity rate.
This article contains information about these precious metals and how you can invest in them.
Among the four precious metals capturing the eyes of investors, palladium is the lesser-known variant that has various uses in the manufacturing of electronics. It is also a component in medicine, dentistry, jewelry, and groundwater treatment.
Palladium is mostly sourced as a critical part of catalytic converters. For this reason, the automotive industry is a major user of palladium, accounting for more than 70% of the world's palladium production. The precious metal is usually sourced from the United States, Canada, Russia, and South Africa – the largest palladium producers in the world.
Platinum is the most valuable of all precious metals. It is the only metal that exceeds the value of gold.
This precious metal can withstand common household chemicals such as bleach and detergent. It is considered an industrial metal similar to silver, and like palladium, it is a component for catalysts that minimizes the effect of emissions in vehicles. Jewelry comes second in its demand.
South Africa and Russia are some of the sources of platinum.
How To Invest In Palladium And Platinum
There are four known ways to invest in palladium and platinum as of late. Both precious metals have similarities regarding how to invest in them.
1) In Bullion Form
Investors of precious metals tend to purchase them in physical forms. Investors accustomed to buying gold and silver turn to tangible bullion, such as coins and bars.
These forms are quite popular because they are used as hedges against inflation. Palladium and platinum refiners produce bullion bars with a .9995 purity.
Investors will buy platinum in these forms because of portfolio growth. Platinum bullion is suitable for investors who want to invest in smaller amounts. Bars and wafers are also more options but are not as common and readily available for everyone.
2) Exchange Traded Funds
While limited, the Aberdeen Standard Physical Palladium Shares ETF is the largest fund for palladium exchange-traded funds (ETFs). It currently holds 181,391 troy ounces of palladium in a security vault in London.
ETFs monitor the value of palladium the way they would an index fund. Sprott Physical Platinum and Palladium Trust ETF holds and invests its physical palladium with a portfolio governed by Canada.
There are currently three platinum ETFs traded in the U.S. and they are backed by either physical platinum or futures contracts.
Investors can choose a structured grantor trust wherein the fund keeps the bullion in vaults. The grantor handles the storage, buying, and selling of the bullion for the owners of the trust. The second option is an exchange-traded note or ETN which is an unsecured debt security. Like a stock, they are also traded in major exchanges.
Investing in palladium and platinum ETF is a passive way to make money online. Investors are investing in the fund supported by palladium and not the physical metal. Investors must also pay for the management fee associated with the corresponding fund.
3) Options And Futures
Investors who have an ample risk appetite can invest in palladium through the futures and options market.
It is another passive way to put in money in exchange for leverage and liquidity. Investing in derivative products of palladium, such as catalytic converters, have the potential for high profits.
Options and futures are geared towards experienced investors as they know how to assess risks. To invest in palladium and platinum futures, seek brokers that are registered at reputable exchanges.
Investors can purchase shares at mining companies for platinum, but it is different from investing in physical platinum. They can buy company shares through brokers or online exchanges, which will also charge for their service. The share's value is determined by the quality of company management and other variables. But while the value of platinum can experience a rising, there is still the possibility of losing money from a company that has poor management.
Palladium stocks are similar to ETFs in that you can buy them to invest. You can obtain exposure to palladium metal without ownership through publicly-traded companies that are concentrated on palladium.
Investing in platinum stocks is highly volatile and should only be done by seasoned investors. You can choose from the mentioned ways of investing in platinum. But remember that you can benefit from studying the nature and volatility of these metals to find out which is appropriate for your risk appetite.
There are many ways to invest in precious metals like pallidum and platinum.
Like gold and silver, several factors can affect their value, such as their uses in various industries. Regarding investing, you can choose to own physical bullion pieces like small bars and coins. Others give you the option of earning passive income like ETFs, company shares, and stocks.
When investing in these precious metals, you must have realistic expectations as they are suitable for long-term gains rather than quick earnings.