In the world of precious metals, platinum is that metal that rules supreme. This gray-white metal is one of the rarest is extremely resistant to wear and corrosion, making it a popular choice for premium jewelry as well as industrial applications. Its appeal and usefulness, which rival that of gold (which is also on the rise), mean that it's both an inflation hedge and a safe-haven for investors wary of geopolitical conflict. As traders become more concerned about global economic stability, the precious metals complex is set to benefit and it wouldn’t be surprising to see platinum lead the way higher.
As you can see from the chart below, the spot price of platinum is testing a key level of support and resistance (shown by the dotted line). Notice how the horizontal trendline has prevented the price from heading higher in the past (shown by the red arrows). This resistance was overcome in mid-June and the resulting bounce off the trendline (blue arrow) suggests that higher prices are likely on the way. (For more, check out: Interpreting Support And Resistance Zones.)
Increase Exposure To Platinum With This ETF
There are few exchange traded funds in the market that track the underlying price of platinum. The most popular choice is ETFS Physical Platinum Shares (PPLT). For those who don’t follow this ETF, you’ll be interested to learn that it has total assets of more than $750 million and trades with a respectable management expense ratio of 0.60%. Since the ETF holds physical platinum and is the purest way to replicate the performance of platinum without opening a futures account. (For more, see: Introduction To Exchange-Traded Funds.)
Taking a look at the chart, you’ll notice that the 50-day moving average is starting to diverge from the 200-day moving average in the upward direction. This bullish signal suggests that the upward momentum is increasing. Most active traders will likely look to protect their position by placing a stop-loss order directly below the combined long-term support defined by the peaks and the 200-day moving average ($139.70).
Investing In Platinum Miners
Unfortunately for retail traders there is no good way to invest pure play platinum miners without looking to the OTC market. Generally speaking, most traders should steer clear of equities that trade in the over the counter market because they are not widely followed can be very illiquid. The high level of risk makes this an area where only experience traders should venture. For those looking for specific picks, the largest player in the area is Anglo American Platinum Ltd. (AGPPY), but the liquidity in its shares makes it an extremely risky selection. (For more, see: A Look At Primary And Secondary Markets.)
The Bottom Line
Since the global economic outlook is dominated by conflict in the Middle East it could be time to increase exposure to precious metals. As mentioned above, platinum is the king of this precious metal complex and will likely lead the group higher. The most popular choice for retail traders is the ETFS Physical Platinum Shares ETF, which tracks the underlying price of the commodity. Unfortunately, most of the largest platinum miners trade on international exchanges so the only option for traders in the U.S. is to turn to the OTC Market, which generally leads to issues of liquidity risk. (For those interested in other ways of investing in platinum, check out: Platinum Group Metals Offers A Real Bargain.)