Why Should You Invest in Platinum, Rhodium & Palladium?
Some precious metals lose their respective shimmer when they are pitted against all the headlines of the ups and downs of the gold and silver market, but platinum, rhodium and palladium have been steadily growing in stature of late.
Some investors are attracted by the more speculative nature of Platinum Group metals and thus their potential price upside, whilst others are drawn to the mystical nature of these rare elements. At Sharps Pixley, most of our offering comprises of gold and silver, however, we also know that some of our customers are looking to add something just a little bit different to their portfolio and this is why we offer expert PGM opinion and buying guidelines to our customers.
Our guide is for those who wish to look past the more popular options of gold and silver in order to venture into precious metal investment.
Platinum is one of the more popular options, and fans of this metal have very specific reasons for investing. In the last few years, investors have begun to investigate platinum as a viable alternative, which in turn has increased the demand for platinum bars. Many investors diversify by combining platinum with silver and gold.
Siberia and South Africa are the only two places in the world where platinum can be mined and of the non-standard precious metals, platinum is by far the most liquid and is supported by the automotive and jewellery industry accounting for 41% and 37% of global demand respectively. China is the world’s largest market for platinum jewellery representing more than 60% of annual demand.
One potential drawback of platinum is the fact it is not readily available and unlike Sharps Pixley, a lot of dealers just aren’t able to supply it.
Rhodium could easily be mistaken for silver in its natural form but it is very brittle with a glassy appearance. One of the biggest advantages of investing in rhodium is its ability to make money for the buyer. For example, in the last few years, rhodium has hit heights of over £7,000 per ounce and has been hovering between £700 and £2,000 per ounce ever since the year 2000.
Roughly 80% of rhodium is used in the automotive industry, with a further 8% consumed by the chemicals industry. Some experts believe rhodium is due to a price spike as automotive companies are buying up large reserves to protect from future price rises, but this activity in itself could mean that rhodium prices could surge in the next few years.
Rhodium is so rare that there are less than a dozen mines on earth that can produce it, which means prices aren’t able to rise as smoothly and meet demand increases like other elements can. What it does mean though, is that when demand increases, prices tend to skyrocket.
Think of fine art – only a few pieces go up for auction by any given artist each year, which is why prices are subject to high spikes and can't be predicted. The same is the case for rhodium.
Palladium has a somewhat varied history and after being discovered in 1803 it is only now starting to gain some traction with investors. After its initial discovery, palladium was left in the shadows until the Second World War, when the United States government blocked the trade of platinum due to the need for the creation of weapons. But, because palladium has a great deal in common with platinum, both chemically and aesthetically, jewellers began using it as an alternative. These days palladium sits alongside gold, silver, platinum and rhodium as one of the big five precious metals.
Palladium prices recorded the strongest precious metal performance in 2017. It has risen by 50% while runner-up gold prices have rallied by 11%. Platinum prices have risen by 4% and this is a sharp contrast compared to palladium prices. Palladium prices have even risen above platinum prices, something not seen since 2001.
Why have palladium prices strongly outperformed platinum prices? For a start, the decline of the market share of diesel cars in favour of petrol cars has weighed on platinum prices and this has supported palladium prices. Moreover, palladium has a substantial supply deficit and this has bolstered prices.
In addition, the environment is just right for palladium prices: strong global growth, a strong increase in Chinese autocatalyst demand and positive investor sentiment. The Eurozone economy has also grown strongly and car sales have had a strong year. However, diesel cars, which use for a large part platinum in their catalysts, are losing market share in the Eurozone so platinum prices have not been able to profit from the boom.
Because palladium is a fairly new arrival on the scene and because of how light it is, it has yet to gain consistently serious interest when it comes to investment. However, for those looking to diversify their portfolio, palladium is ideal due to its relatively low-price entry point.
What Can We Expect in the Future?
Over the last few years, interest in platinum by investment funds, pension funds and private investors has increased. Platinum, like all precious metals, tends to do well when mainstream investments are heading ever southwards. Rhodium, the most expensive of all the precious metals, offers massive profit potential and is enjoying a lot of mainstream media attention at the moment. Even though palladium is relatively late to the party, it could be argued it is the most important of all the big five, given its importance industrial importance. White gold, for example, is an important part of the jewellery industry and is made using a mixture of palladium and gold.
Investors who wish to diversify their metal purchases should consider purchasing amounts of all three elements. Gold and silver will continue to be the go-to option for investors, but platinum, palladium and rhodium offer discerning investors an effective option to gain a complete overview of the precious metals market.
If these investment options appeal to you but you have no clue where to start, contact us today at Sharps Pixley and we can offer expert advice and guidance.
01 Feb 2018 | Categories: PGM