Investment - PMM

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Investment

Platinum and palladium as investment metals

Investment
 

Platinum and palladium are tangible assets which share with other precious metal investments the attractive physical properties of being largely unchanging and unchangeable. Like gold and silver, platinum and palladium are acceptable as a means of exchange by virtue of their internationally standardized form and purity.

During the last thirty years a number of different retail investment products have been introduced to meet demand for these metals, which can be bought and kept as a repository of value, often for long periods.


Bars and coins

Various refiners in the USA and Europe are or have been producers of small investment bars in platinum up to one kilogram (32.15 troy oz) in weight. Legal tender platinum bullion coins and collectors' coins have been issued by the Royal Canadian Mint, the Perth Mint and the United States Mint, and collectors' coins in both metals by other smaller mints. Many of these products are in circulation and can be obtained from coin dealers and distributors.

The public in Japan buys kilogram and smaller platinum ingots produced by the principal Japanese precious metals refiners. Another form of investment in Japan is the accumulation plan, introduced in 1992, which enables investors to buy and accumulate platinum to the value of a regular sum of money paid monthly into their account.


Exchange Traded Funds (ETFs)

The advent of ETFs in 2007 opened the door to investment in precious metals to a wider audience. Whereas previously an investor wanting physical exposure would have to either take physical delivery of the metal or open an allocated account, thereby concerning themselves with a host of associated costs and risks, investors could now invest in physically backed securities. These are tradeable throughout the day and in smaller denominations (typically 1/10th oz), enabling a wider range of investors to gain physical exposure at a fraction of the cost. The popularity of ETFs has had a profound impact on the wider market, with cumulative investment in platinum and palladium by end-2010 reaching 1.3 million oz and 2.3 million oz respectively. However, in 2011 the palladium ETF market returned over half a million oz to the market on a net basis, thereby illustrating the potential of this market to swing from one extreme to the other.


Size of investment demand

Investment demand for the traditional forms of physical platinum was at its height in the 1980s, stimulated by a proliferation of new products and by concern about the security of supplies of platinum from South Africa, the main producing region, during the period of sanctions against apartheid. In 1988 a total of 630,000 oz of platinum was sold in the form of bars and coins, representing 17 per cent of world platinum demand that year. The popularity of platinum for individual investors declined in subsequent years, accounting for less than 2 per cent of annual demand in the early 2000s, though it has picked up dramatically in recent years with the introduction of ETFs. In 2009 and 2010 investment demand accounted for over 10 per cent of total demand for both platinum and palladium.

Investment demand for platinum and palladium since 1980 is estimated in our market data tables.