Diversification is a smart investment approach not only between stocks, bonds and precious metals but also within the metals sector itself.
For just over a decade from roughly 2000 to 2011, platinum traded at a premium (or higher price) than gold. Currently, platinum trades at a discount to gold or simply put it’s about $280 cheaper per ounce. That means platinum is cheap relative to gold since the start of 2000.
Are platinum coins part of your precious metal strategy?
Platinum benefits from both investment demand, in the form of bars and coins, and also from significant industrial and manufacturing demand worldwide.
Platinum boasts a wide variety of industrial applications and revs up heavy demand from automakers for use in catalytic converters. Platinum is also used in dentistry, watch-making, in pacemakers and other medical treatment devices.
Demand for platinum coins has been on fire this year. In the first half of 2016, platinum coin sales increased by 98% year-on-year, according to the GFMS team at Thomson Reuters.
U.S. Mint Sells Out
Voracious investment demand emerged at the U.S. Mint this summer for platinum coins. In July, the U.S. Mint began selling platinum coins for the first time in two years and sold out completely of its inventory a month later.
In July, the Mint offered 20,000 legal tender 2016 American Eagles1-ounce platinum bullion coins. Within days, the Mint sold 19,000 ounces, marking July as the highest quarterly sales level since 2001. In August, the US Mint sold out of the remaining 1000 platinum coins available. The U.S. Mint does not sell its American Eagleplatinumbullion coins directly to the public. Instead, the platinum coins are offered to a list of approved firms called “authorized purchasers” who then resell them to dealers, collectors and investors.
The Big Picture
Precious metals from gold to silver to platinum are posting massive gains in 2016, far outpacing returns in stocks and bonds. Silver is the leader up 44% through Sept. 22, while gold recorded a 26% advance and platinum is up 19%.
Investors around the globe have been aggressively buying precious metals coins to diversify their portfolio, including gold, silver and platinum. The case for diversifying with precious metals is clear.
Precious metals coins and bars are a major asset class, just like stocks and bonds. Most importantly they show a negative correlation to the stock market, which means typically when stocks fall, precious metals rise. If one asset class is falling, it benefits your portfolio to own another asset that will rise during that time.
With platinum trading at a discount to gold since the beginning of 2016, its lower price point of entry has encouraged strong investment demand.
Despite the slowdown in global growth, industrial demand for platinum remains high in the automotive, chemicals and glass sectors and is estimated to rise by 10% in 2016, according to Johnson Matthey. Meanwhile, the platinum market is expected to show a deficit of 861,000 ounces this year.
Platinum coins and bars are a great way to diversify your bullion holdings, given their dual role as a precious metal investment but also one with strong industrial applications. Call Blanchard and Companys Portfolio Managers at 1.866.827.4314 to learn more.