Everyone wants to make a smart investment, but deciding the best choice with many options can be challenging. Gold and platinum are two of the most popular precious metals people invest in.
Both of these metals have long been seen as valuable, yet when it comes to investing, it's essential to understand their differences and choose the one that best suits your needs.
Gold and platinum are both rare and valuable but have different characteristics that make them ideal for different types of investments. So, which is the best investment: gold or platinum? Read on to find out.
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Brief About Gold
Gold's been a popular metal choice since prehistoric times. It has historically been minted into currency, used in ornamentation and fashioned into jewelry. Gold's appeal stems from its being both a precious metal and a highly durable commodity.
Gold was a status symbol and an emblem of wealth and power in ancient societies. It was all fashioned from jewelry, coins and other monetary and ceremonial objects. Gold coins were circulated as a means of exchange in some regions and the metal was used to mint other currencies. Taxes and salaries were even paid in gold coins.
Several traditional ancient uses for gold persist today. Its use in jewelry and ornamental products is still highly valued because of these qualities. Gold is also used to manufacture coinage and is still a significant aspect of the global economy. Because of its high electrical conductivity and its corrosion resistance, gold finds widespread application in the electronic industry.
Gold's usage in medicine is based on the belief that it inhibits the growth of microorganisms and reduces inflammation. It's processed into stents and other implantable medical devices. Gold is used to cover medical devices to protect them from corrosion and wear caused by contact with bodily fluids.
Gold is also a vital aspect of the investment world. Investors purchase and sell gold as an investment asset, as it is a safe-haven asset and may offer an essential hedge against inflation and economic instability.
Brief About Platinum
Platinum is a rare, naturally occurring metal with a wide range of uses in everyday life. It's also known for its superior strength, durability and corrosion resistance, making it a desirable metal.
Platinum can be found naturally occurring on Earth, but it is usually found mixed with other minerals in the form of nuggets or grains. It is often found in regions with ancient volcanic activity such as South Africa, Canada and Russia. Because it is so rare, it is usually mined in open-pit mining, where large pits are dug to extract the metal from surrounding rocks.
Platinum is used in many industrial processes such as in producing catalytic converters, which help reduce car emissions. It's also used to create surgical instruments and medical implants, as it's non-reactive and biocompatible to the human body. Further, platinum is a critical component of fuel cells, which are devices that convert chemical energy into electricity.
In addition to its industrial uses, platinum is valued for its beauty and malleability, making it a favorite for jewelry makers. Due to its rarity, it's usually found in higher-end jewelry and can be used to make rings, earrings, necklaces and bracelets. Its strength makes it a great choice for creating intricate and detailed pieces.
Platinum also has many other uses in everyday life. For example, it's used to create coins, other forms of currency, magnets, electrical contacts and spark plugs. It's even used in aerospace to make parts for satellites and spacecraft.
Why You Should Invest in Precious Metals
Investing in precious metals like gold and platinum can be a great addition to your portfolio.
Gold vs. Platinum: Price and Liquidity
Gold and platinum prices move together over extended periods. Yet, different circumstances have different impacts on certain precious metals. Platinum's worth is determined by market forces like supply and demand, whereas gold is primarily subject to the whims of investors.
During economic unpredictability, gold's standing as a haven causes its prices to rise. And when demand drops, platinum's price falls along with it. In times of persistent economic expansion, the opposite is true.
The current spot price of gold is $1,568.40 per ounce, while platinum sells for $986.31 per ounce. Platinum's price is sensitive to shifts in supply and demand in the current economic climate. The dismal global economy and rising trade tensions between the US and China have pushed the price of gold.
Inter-commodity spread describes the difference in price between the two precious metals. There are periods when gold is more expensive than platinum and other times when platinum is more expensive than gold.
The ratio of gold to platinum is instructive since it shows how the two metals are related and may be used to infer market mood. Platinum is less expensive than gold if the ratio is greater than 1.
Gold and platinum are highly liquid assets. They are easily exchangeable for money. Both participate in international over-the-counter and physical markets.
Gold vs. Platinum: Volatility
Gold is generally less volatile than platinum and tends to experience smaller moves in value over time. This is mainly because of gold's long history as a safe-haven asset and its widespread use in jewelry and other consumer products.
On the other hand, platinum is more volatile than gold due to its limited usage and the fact that it's much rarer. The price of platinum can move significantly in a short period and it can be more difficult to predict the direction of its price movement.
One way to measure the volatility of a particular metal is to compare its annual volatility relative to the S&P 500, which is a stock market index. Gold's annual volatility relative to the S&P 500 is typically around 20%, whereas platinum's annual volatility relative to the S&P 500 is usually approximately 30%.
This shows that platinum is more volatile than gold. Still, it's important to remember that the volatility of both metals can change over time and can be affected by global economic and political events.
Another way to compare the volatility of gold and platinum is to look at their historical price movements. For example, in 2020, gold experienced a strong rally while platinum fell. This shows that gold can be less volatile than platinum regarding short-term price movements.
Gold vs. Platinum: Return Potential
The potential returns largely depend on the market price when investing in gold or platinum. Gold has historically been a good hedge against inflation and its price tends to increase when the stock market is down.
Platinum has had a history of higher volatility and is more strongly influenced by industrial demand. In the short term, it can be a more volatile metal to invest in but its price can skyrocket when demand is high.
Both metals offer attractive opportunities. Gold is a safe and reliable investment, with potential returns ranging from 5-8% over the long term. Platinum has a higher potential for returns, with some estimates ranging from 10-15%. However, due to its volatility, it is not recommended for risk-averse investors.
Which Is More Valuable: Gold or Platinum?
As the gold-to-platinum price ratio begins to diverge, investors can take advantage of the situation (the price of gold divided by the price of platinum). The ratio is often lower than 1, indicating that platinum costs more than gold. Nonetheless, the present ratio is close to 1.6, making platinum more financially advantageous.
Gold and platinum are precious metals but react differently under certain conditions. Platinum's unreliability emerges at this point. The price of gold is not determined by the underlying supply and demand but rather by the emotions of traders. In comparison to platinum, it has a lower volatility.
Another factor to consider is that only South Africa and Russia produce platinum. The global price of platinum will react to developments in these two nations. As a result of power outages at South African mines in March 2008, the price of platinum soared to a record $2,252 per ounce.
As of November 2008, it dropped to $774, a significant loss. Platinum prices may be influenced by uncertainty in the automotive market. As of February 2023, the metal's price is $956.
Historically speaking, gold prices have mostly stayed the same. Yellow metal is produced in dozens of nations, including China, the United States, Australia, India, Canada and many more. It's doubtful that a supply problem in one country would significantly affect global prices.
As much as people like to argue over which precious metal is better, gold remains a safe investment. Nonetheless, the yellow metal had a rise of 18.9% in 2019. Investors might consider platinum and other precious metals in light of their current prices.
How Can You Invest in Gold or Platinum?
Gold and platinum investments offer portfolio diversification and protection from inflation. We now explore gold and platinum investment strategies.
Exchange-Traded Funds (ETFs)
ETFs are investments designed to track the price of a specific asset such as gold or platinum. They comprise hundreds of underlying investments such as mining stocks, gold futures and other investments. ETFs also offer investors the benefit of diversification, as they can be used to spread risk across different investments.
When investing in gold or platinum ETFs, the strategy is simple. First, you must decide which metal you want to invest in. Then, you'll need to choose an ETF that tracks the price of that metal.
You can find ETFs that track the prices of gold and platinum on most major stock exchanges. Once you've chosen the ETF, you can buy and sell shares in the same manner as you would with any other stock.
This strategy involves owning the physical metal, either in the form of bullion bars or coins. The advantage of this strategy is that you have the tangible asset in your possession and you can physically see it. Investing in physical metal also provides a sense of security, as you are guaranteed to own the metal and have the power to control its sale or transfer.
You will need to find a secure location to store the metal such as a safety deposit box or you may need to purchase insurance to cover the metal. You should consider the quality and purity of the metal, as well as the track record of the seller. You should also research the metal's current market value and any taxes or fees you may need to pay to purchase and own the metal.
An agreement to purchase or sell an item at a specified price on a future date is known as a futures contract. Possessing the metal is necessary for a gold or platinum futures contract to allow you to profit from the metal's market price fluctuations.
This approach involves making a wager on the up-or-down movement of the price of gold or platinum. By purchasing a futures contract, you commit to paying the specified price for the metal on the selected future delivery date.
If the metal's price has increased to more than what was agreed upon in the contract, you will get a payout when the time comes. There may be no need to pay the total contract fee if the price has fallen after you signed the contract.
For instance, you may invest in gold and commit to paying $1,500 per ounce for it in two months by purchasing a futures contract. If gold's price increases to $1,600 per ounce during the allotted time frame, you will get the extra $100.
Companies that mine for precious metals like gold and platinum sometimes have their equities traded as part of the "mining" sector. You effectively invest in a gold and platinum mining corporation by purchasing these shares.
What's great about investing in mining stocks is that the price of the stocks moves in tandem with the prices of the metals. So if the prices of gold or platinum go up, so will the value of your mining stocks and vice versa. It's also a great way to diversify your portfolio, as the appreciation in the value of the stocks will be different from other assets in your portfolio.
Suppose you invest in a mining stock of a gold mining company. If the price of gold goes up, the company's profits will likely increase due to the higher sales of the gold they produce. This will lead to an appreciation in the value of their stocks and you'll have a nice return on your investment.
Mutual funds provide a centralized investment vehicle for a diversified portfolio of assets, including gold and platinum investments, equities, bonds, ETFs and other commodities, all managed by a team of experts.
Mutual funds allow investors to spread their money across various assets and regions, spreading risk and increasing profits.
Shareholders in a mutual fund have their money combined with other shareholders. The fund's portfolio manager invests the collected capital in various financial instruments such as equities, bonds and commodities like gold and platinum. To take advantage of market opportunities and reduce risk, the portfolio manager may also purchase and sell assets in the fund.
Mutual funds are an excellent method to diversify your portfolio. There are many different ways to invest in them, including through a retirement plan, a broker or a mutual fund firm. Shares of a mutual fund are also available for purchase on the stock market.
A mutual fund's management fee is deducted from your investment and used to pay for the fund's operational expenses. You may be subject to sales charges or fees when purchasing or selling mutual fund shares.
Can You Invest Precious Metals in an IRA?
You can open an IRA to invest in precious metals such as gold, silver and platinum. This type of account is called a self-directed IRA, allowing you to invest in a wider variety of investments than traditional IRAs.
Precious metals IRAs work similarly to traditional and Roth IRAs, except that the investment is in physical gold, silver, platinum or palladium bars or coins. The precious metals are held in an IRS-approved depository in your name, so you can rest assured that your investment is secure.
To open a precious metals IRA, you'll need to find a qualified custodian specializing in precious metals. They'll help you with the paperwork and will be responsible for facilitating the purchase and storing of the metals. You can also use a broker to purchase the metals, but they'll often charge a commission or other fees.
The IRS allows some forms of investments in tangible precious metals. Coins and bars of gold, silver, platinum and palladium are all examples. To be legal tender, coins must be struck by the United States Mint or a government recognized by the United States.
There are requirements for these coins. For instance, the minimum fineness for gold coins is.995 (the same goes for silver).999 (for palladium and platinum) and.9995 (for palladium and platinum). In addition, the IRS has set limits on which coins are allowed for purchase. For example, American Eagles and Canadian Maple Leaf coins are all allowed, but other foreign coins are not.
Precious Metals IRA Withdrawal Regulations
You can withdraw from your precious metals IRA at any time, but you should know that there are certain regulations you'll need to follow. When you withdraw from your precious metals IRA, you'll need to pay taxes on the amount you withdraw and you may also incur an early withdrawal penalty for withdrawals taken before age 59 ½.
In addition, you must take a distribution from your precious metals IRA if you have reached the age of 70 ½. This distribution must be taken by April 1st of the year following the year you reach 70 ½ and it is called the Required Minimum Distribution (RMD).
You should also be aware of the IRS rules that allow you to make a "hardship withdrawal" from your precious metals IRA. To qualify for a hardship withdrawal, you must demonstrate that the withdrawal is necessary to pay for an immediate and heavy financial need. These needs include medical or funeral expenses, purchasing a first home and specific education expenses.
Gold and platinum have their advantages, but gold has a few more benefits, making it the better choice for many investors. Gold offers greater liquidity than platinum, making it easier to convert into cash when needed. It is also more widely accepted in international markets, making it a smart choice for diversifying its assets across multiple countries.
Gold is also less volatile than platinum, making it a more stable investment option. Moreover, gold doesn't typically undergo the same price fluctuations as other commodities, making it a safer long-term investment.
Gold IRAs are a great way to invest in gold without dealing with the hassle of storage and security. A gold IRA holds your gold in a secure, FDIC-insured account. You can also rest assured that your gold is insured against theft and other threats.
Our highly recommended companies can help you find the best gold IRA providers and start your gold investment quickly and easily. They can help you find a suitable gold IRA company and set up your account in minutes. They also offer helpful resources on gold investing basics and gold IRA tax rules.
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