Why is Platinum So Expensive?

Platinum is one of the rarest and most precious metals in the world. Its scarcity, combined with its unique properties and industrial uses, makes platinum a highly sought-after commodity for investors. If you are considering investing in platinum, the first question that comes to your mind is, "Why is platinum so expensive?"

The combination of limited supply, high demand in various industries, and its status as a valuable investment asset all contribute to the expensive nature of platinum. As long as these factors remain in place, it is likely that platinum will continue to be one of the most costly metals in the world.

Platinum's Price History

Platinum has not always been so expensive, but its price is almost always quite volatile because of its rarity and difficulty to mine. Platinum's price history has been a rollercoaster ride over the last two decades. At the beginning of 2000, platinum was trading at around $450 per ounce. The price remained relatively stable until late 2001 when it began to surge, reaching a peak of about $2,270 per ounce in May 2008.

A few major factors drove the price, especially a weakening U.S. dollar and a drop in the supply of platinum from issues in South African mines. This peak didn't last long, however.

The global financial crisis came months later, causing the price of platinum to plummet, dropping to a low of $763 per ounce in November 2008. From there, the price of platinum began to climb again, nearly hitting $1,900 per ounce in 2011.

Since platinum's peak in 2011, its price has steadily declined. The decline steepened after Volkswagen's emissions scandal, which led to a decrease in the production of diesel engines and thus also diesel catalytic converters (which use a lot of platinum). By September 2019, platinum was trading at around $786 per ounce, marking a 14-year low.

However, the COVID-19 pandemic brought about a sharp increase in demand for precious metals, including platinum, as investors sought safe havens. The price of platinum climbed to $1,200 per ounce in August 2020 and has continued to rise since then.

As of July 2024, platinum is trading at just below $950 per ounce, a significant increase from its 2019 low. Despite its ups and downs, platinum remains one of the most sought-after precious metals in the world, with applications in various industries such as jewelry, automotive, and electronics.

What is Platinum Used For?

Despite its rarity, platinum wouldn't be so expensive if it wasn't in high demand and a vital component of a myriad of consumer and enterprise goods. Here are the major uses of platinum:

• Jewelry: Platinum's lustrous, white appearance makes it an ideal material for high-end jewelry. It is commonly used to make engagement rings, wedding bands, earrings and other luxury items.
• Automotive: Platinum is a key component in catalytic converters, which reduce harmful emissions from vehicles. It is also used in spark plugs and other engine components.
• Electronics: Platinum is used in the manufacturing of liquid crystal display (LCD) screens (used in most modern TVs, PC monitors and laptops), hard disk drives and other electronic components because of its excellent conductivity and resistance to corrosion.
• Chemical: Platinum is a vital catalyst in the production of a massive range of chemicals including fertilizers, pharmaceuticals and other chemicals.
• Petroleum: Platinum is used in refining crude oil into gasoline, diesel and other petroleum products.
• Medical Devices: Platinum is used in medical devices such as pacemakers, dental implants and other surgical instruments because of its biocompatibility and resistance to corrosion.
• Investment Vehicle: Platinum is a popular investment option, with many investors holding physical platinum bullion or purchasing platinum exchange-traded funds (ETFs) as a hedge against inflation and market volatility. You can also now buy platinum in an IRA. Keep reading to find out how.

Platinum's versatility paired with its scarcity has driven its price, making it one of the most expensive metals in the world.

Platinum vs. Gold: Which is Rarer?

Platinum and gold are well known for their relative scarcity, but platinum seems to be slightly rarer in the Earth's crust (the only accessible part of the Earth to mine, so far). However, the metal is much more scarce in practice because it is difficult to mine and the margins are small.

In 2022, global platinum mine production (not counting recycled platinum from catalytic converters or other sources) was about 190 metric tons, compared to the ~3,000 tons of gold produced the same year. Platinum is more rare than gold, but it actually isn't the rarest precious metal. Other platinum-group metals like iridium, osmium, and rhodium are an order of magnitude rarer.

Where to Buy Platinum (Direct Delivery or IRA)

For those looking to buy platinum, it is important to understand the different ways to purchase it. Platinum can be bought for home delivery with cash, credit card or bank account or through an IRA.

Some of the best precious metals dealers that offer direct delivery and IRAs are Advantage Gold, Birch Gold Group, and American Hartford Gold. Advantage Gold specializes in IRA rollovers with a world-class staff; it has built a strong reputation with its customers.

Is Platinum a Good Investment Right Now?

Platinum could be a great investment in the right situation. It has tracked closely with gold for much of its history, so it could be a decent safe haven investment. However, platinum has performed significantly worse in recent years.

The price of platinum is also heavily dependent on supply and demand. If you use factors that determine supply and demand to build a strong investment thesis, a well-positioned trade could work out well with enough luck. However, it can still be unpredictable.

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