Platinum: Precious Metal or Industrial Metal?
Gold and silver prices have shot higher this year as investors start positioning themselves for a potentially more challenging environment ahead. While gold long-term has a very low correlation to stocks, it does tend to behave like a defensive risk hedge when times get tougher. We believe that may be happening right now. Also, when yields fall, the 0% yielding metal looks less like a lost opportunity cost and that can help support prices as well.
Industrial metals, on the other hand, are much more economically dependent. Because they’re used in so many different manufacturing applications, any economic slowdown can result in lower demand for these commodities, which leads to lower prices. We often see this with copper, aluminum and even silver.
But what about platinum? It could theoretically fall into both categories.
source: Pixabay
Most people are probably already familiar with its uses for high end jewelry. It’s often used in wedding bands and engagement rings, but also necklaces and other keepsakes.
Its uses on the industrial side are much more varied. Platinum’s biggest use is in the automotive industry where it’s a key component in the production of catalytic converters. It’s also being increasingly used in the production of hydrogen fuel cells for use in electric vehicles. Its potential to be used in both gas & diesel vehicles as well as electric ones could be a key driver in sustaining its demand over the long-term. Platinum is also used in electronic and medical devices as well as within the chemical industry.
The wide range of uses for platinum helps make the case for why we feel it could make for a good investment too.
When the global economy is healthy or growing, the demand for commodities tends to improve as the demand for goods improves. Because it touches so many areas of the economy, platinum often experiences more durable demand.
Yet when the economy slows or stagnates, platinum has a precious metal component to fall back on. We feel it’s unlikely that platinum will experience the defensive behavior that gold often does during times of turmoil, but physical metals still have the ability to create diversification benefits that can reduce risk exposures in most portfolios.
As the global economy enters a period where uncertainty may be increasing, an asset that touches both sides of the fence could be especially beneficial.
If you’re interested in adding platinum to your portfolio, consider the GraniteShares Platinum Trust (PLTM).
Disclaimer: This material must be preceded or accompanied by a prospectus. Please read the prospectus carefully before investing or sending money. To obtain a prospectus visit the link https://www.graniteshares.com/Documents/49/GraniteShares-Platinum-Trust-Prospectus.pdf Shares of the Trust are not insured by the Federal Deposit Insurance Corporation (“FDIC”), may lose value and have no bank guarantee. PLTM is not a mutual fund or any other type of Investment Company within the meaning of the Investment Company Act of 1940, as amended, and is not subject to regulation thereunder. The Trust is not a commodity pool for purposes of the Commodity Exchange Act of 1936, as amended Trust shares trade like stocks, are subject to investment risk and will fluctuate in market value. The value of Trust shares relates directly to the value of the platinum held by the Trust (less its expenses), and fluctuations in the price of gold could materially and adversely affect an investment in the shares. The price received upon the sale of the shares, which trade at market price, may be more or less than the value of the gold represented by them. Shares of the Trust are bought and sold at market price. Brokerage commissions will reduce returns. Market Price: The current price at which shares are bought and sold. Market returns are based upon the last trade price. NAV: The dollar value of a single share, based on the value of the underlying assets of the Trust minus its liabilities, divided by the number of shares outstanding. Calculated at the end of each business day. Physical Replication: The Trust owns the underlying assets of the index whether they are stocks, bonds, or in this case, platinum bars. The objective of the Trust is for the value of the Shares to reflect, at any given time, the value of the assets owned by the Trust at that time less the Trust’s accrued expenses and liabilities as of that time. The Shares are intended to constitute a simple and cost-effective means of making an investment similar to an investment in platinum. An investment in allocated physical platinum bullion requires expensive and sometimes complicated arrangements in connection with the assay, transportation and warehousing of the metal. Traditionally, such expense and complications have resulted in investments in physical platinum bullion being efficient only in amounts beyond the reach of many investors. The Shares have been designed to remove the obstacles represented by the expense and complications involved in an investment in physical platinum bullion, while at the same time having an intrinsic value that reflects, at any given time, the price of the assets owned by the Trust at such time less the Trust expenses and liabilities. Although the Shares are not the exact equivalent of an investment in platinum, they provide investors with an alternative that allows a level of participation in the platinum market through the securities market. The Sponsor of the Trust is GraniteShares LLC. ALPS DISTRIBUTORS, INC. PROVIDES MARKETING SERVICES TO THE TRUST. GRANITESHARES IS NOT AFFILIATED WITH ALPS DISTRIBUTORS, INC. Trust Risks Investing in the shares involves significant risks, including possible loss of principal. You could lose money on an investment in the Trust. For a more complete discussion of risk factors relative to the Trust, carefully read the prospectus. Shares are created to reflect the price of the platinum held by the Trust, the market price of the shares will be as unpredictable as the price of platinum has historically been. This creates the potential for losses, regardless of whether you hold Shares for the short-, mid- or long-term. The amount of platinum represented by each share will decrease over the life of the Trust due to the sales of platinum necessary to pay the Sponsor’s Fee and Trust expenses. Without increases in the price of platinum sufficient to compensate for that decrease, the price of the Shares will also decline and you will lose money on your investment in shares. The Trust is a passive investment vehicle. The price received upon the sale of shares may be less than the value of the platinum represented by them. The Trust is not a diversified investment, it may be more volatile than other investments. The Trust may be forced to sell platinum earlier than anticipated if expenses are higher than expected. Platinum Benchmark - LBMA Platinum Price PM. ICE Benchmark Administration (IBA) is the administrator for the LBMA Platinum Price.
An investor should consider the investment objectives, risks, charges and expenses of the Funds (or of the investment company) carefully before investing. To obtain a prospectus containing this and other information, please call 1-844-476-8747. Read the prospectus carefully before you invest.
ETF distributed by ALPS Distributors, Inc. (ADI)