Gold and silver are getting most of the attention this year, but platinum and the Aberdeen Standard Platinum Shares ETF (NYSEArca: PPLT) could offer investors some precious metals upside, too.
PPLT seeks to reflect the performance of the price of physical platinum, less the expenses of the Trust’s operations and is designed for investors who want a cost-effective and convenient way to invest in platinum with minimal credit risk.
“The platinum and gold historic direct correlation of 0.7 makes it possible to add it to a portfolio and have a different effect than gold does,” according to Vantage Point Trading. “A correlation of 1 means that the two markets are positively correlated, and zero reflects no correlation at all. Hence, if an asset has a correlation below 0.5 it is wise to add it to a portfolio.”
Demand Dynamics
On the demand side, platinum will continue to enjoy robust industrial demand. Additionally, platinum jewelry is starting to enjoy a jump in demand as well, especially among the Millennial generation.
Platinum is primarily used in catalytic converters in diesel-powered automobiles, but environmental concerns previously tamped down demand for the precious metal. As such, the price of platinum has fallen over the years amid weaker demand and excess supply, whereas gold and silver have found safe-haven support on an increasingly dovish Federal Reserve monetary policy outlook and palladium benefited from cars that run on gasoline.
“Like any commodity market, the platinum market depends on supply and demand. Industrial breakthroughs and innovations are responsible for changes in supply and demand for commodities,” notes Vantage Point Trading. “In the case of platinum, it sits at the core of the hydrogen economy as it is being used at generating green hydrogen and for fuel cell electric vehicles.”
With respect to the other precious metals, platinum presents a value proposition for seasoned investors and beginning investors looking to shore up their portfolios with commodities. On the charts, platinum looks healthy, technically speaking, could be poised for some near-term upside.
“From an investing point of view, platinum offers the same hedge for risk as gold does. However, historically, it outperformed gold during times of financial distress,” notes Vantage Point Trading. “For example, during the 2008 Great Financial Crisis, platinum’s weekly returns outperformed gold by more than 30%. Therefore, more gold investors may consider platinum as a proxy for gold, as the correlation mentioned at the start of the article would suggest.”
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.
