WHAT is Platinum
Platinum is a chemical element, precious metal and commodity that manufacturers use primarily for jewelry, electronics and automobiles. It appears on the periodic table of elements by the symbol Pt. Spanish general of the navy and scientist Antonio de Ulloa introduced platinum to Europe in 1735. Due to its silvery white appearance, Ulloa named the metal plantina, which means little silver.
Platinum futures are traded through commodities contracts on the New York Mercantile Exchange, the Chicago Board of Trade, and the Tokyo Commodity Exchange. It is also possible to invest in platinum by purchasing shares of an exchange-traded fund that invests in platinum or in a number of precious metals, like the iPath Bloomberg Platinum Subindex Total Return ETF.
BREAKING DOWN Platinum
Platinum is mined in both Russia and in South Africa. About half of the mined platinum goes into jewelry, where it is desirable because it looks silver in color but does not tarnish, and is stronger and more durable than gold. In the United States, platinum engagement rings are a popular alternative to white gold engagement rings, which are composed of gold, alloys, and a rhodium plating that gives them a white look. But rhodium fades over time, requiring white gold rings to be replated, whereas platinum rings do not.
The auto industry uses platinum for catalytic converters, which help reduce the toxicity of gases and pollutants in the exhaust that an internal combustion engine creates. Platinum and other platinum grade metals in catalytic converters have led to a secondary market for scrap converters, which scrap businesses will buy in order to extract the metal for resale.
Platinum is one of the most valuable elements in the world, 15 to 20 times rarer than gold based on annual mining production. This means for the past half century, the platinum has traded at a significant premium to gold, though this has not generally been the case since 2008, as a weak global economy put a damper on demand for the precious metal and investor unease about central bank stimulus sent the price of gold higher.
Platinum as an Investment
Since the 2008 financial crisis, platinum has generally performed worse than other metals like gold, silver and palladium. Market observers believe a crash in platinum markets in 2008 scared the investment class away from the metal, leaving the automobile and jewelry industries as platinum’s only source of demand.