Platinum and palladium have a myriad industrial applications and are great storers of value.
As with gold and silver, there are many reasons why investors choose to own and trade these precious metals.
As part of a portfolio, they can provide security and hedge against other assets. Platinum group metals have proved that they can hold value in times of political stability, due to the scarcity of global supply coupled with a constant demand from industrial consumers. Instability, particularly in the places where the metals are mined, can also lead to higher prices.
Some investors choose to hold the assets in a long-term prediction that their value will remain high, however the volatility of the PGM prices when compared to gold means that some choose to trade platinum and palladium regularly, buying and selling according to predicted short-term fluctuations.
Whatever the hold period, trading palladium or platinum for profit means buying the precious metals at low prices, selling them high, and knowing how to spot the difference and time your trades.
If you're trading platinum and palladium regularly, profit can also depend on minimising the hidden costs of accessing the market and executing those trades, which is one reason to consider making your trades with BullionVault.
The first rule of investing for profit
Many sources will claim they can teach you the secrets to getting a trading edge in the precious metals markets, or say they have special insights into the dynamics of platinum and palladium prices. But few will remind you of the first rule of investing for profit, whether it be in the physical palladium and platinum markets, platinum or palladium futures, stocks, currencies or commodities: the rule is to make sure your trading costs are as low as possible.
You might buy low and sell high, but if you're trading palladium or platinum actively, your profits will dwindle if you're paying high brokerage fees every time you trade. A trading strategy that that starts with high fees is never going to be as successful as it should be.
Whether you want to enter the platinum and palladium market as a long term investor or as an active trader, we can show you a solution that makes real, high-integrity platinum group metals available to you, stored and insured securely in professional vaults. Using BullionVault your metals are traded at live wholesale market prices, with significantly lower costs than buying and selling retail.
Why is the wholesale market the right choice?
To trade palladium or platinum actively and profitably, first calculate your costs. Fluctuations and predictions of platinum and palladium prices may motivate the timing of your trades, but if you're paying high commissions and a wide spread on each transaction, you won't be making the most of this particular investment market.
Using retail investor accounts in platinum can be a way of losing money rapidly, which is why access to the wholesale market is vital. Why is this?
Most simply, if you buy and sell precious metals with BullionVault, you can avoid high brokerage fees for accessing the wholesale market. But there are other ways that platinum and palladium trading with BullionVault can save costs and earn money. To discover what they are, read on...
Uncovering the hidden costs of platinum and palladium trading
If the price of your investment hasn't moved, owners of any financial asset should expect to get back a little less than they spent when they sell.
That's how dealers and brokers hope to profit – by charging you more to buy than they pay per ounce when you sell. The "spread" between the buy and sell prices is responsible for part of the dealer's profit, just as it is on currency exchanges.
But with platinum coins and bars, shopping around is much harder when you want to exit your platinum investment, because you'll find fewer retailers willing to quote you a re-purchase price than with other precious metals such as gold or silver.
The investment market in platinum and palladium is nowhere near as busy as the market for gold. A lack of awareness amongst private investors has led to lower levels of investor interest, which leads to more risk for a retailer buying back stock. Used platinum coins and small bars can also be harder to sell "retail" because people tend to prefer brand-new products when they buy. This means that second-hand items often returning into the wholesale supply chain, melted down and recast as part of a large wholesale bar. Scrappage costs money, which the dealer must recoup from his or her customers.
Where retailers do offer to buy back coins or small bars you hold, the discount below 'spot' prices usually runs deeper than gold. Typical discounts start at 1% in Germany, 2% in the US and 3% or more in the UK. On a round trip at flat prices, US investors in platinum face losing at least 7% of their money in retail coins or small bars.
In Europe this gap – known as the bid/ask spread – costs investors in Germany at least 12% and 14% in the UK. But their loss is widened again by VAT, a sales tax you must pay when you buy physical palladium or platinum but which you cannot reclaim when you sell.
That is why, on a flat underlying price, physical platinum or palladium traded through retail dealers in Europe can cost you one-third of your money. For those not wanting to lose money before they've started, the wholesale market is the place to be.
Entering the market as a professional: making trades and earning the spread
These retail costs are far too high to offer a serious investment. But there is another way to trade physical platinum and palladium – a way you can avoid high premiums, get full market value when you sell, and cut your costs to a fraction of the retail market.
Another way that metals traders make profit from their customers is through the spread. Gaining access to the spread is the first tool that gives you the ability to trade precious metals and - rather than pay costs - lock in profit, and that's why most businesses and brokers keep it for themselves.
Unlike any other ways of platinum or palladium trading, BullionVault allows you to undertake active trading like a market professional, by quoting prices to others in the market, rather than having to take what's on offer. This allows you to trade metals and earn the spread.
For example, if palladium prices are at $1,300, a trader might bid to buy $1,299 and offer to sell at $1,301. As a liquidity provider you earn the $2 in the spread. Trading on BullionVault allows anyone who wants to trade platinum, palladium to become a liquidity provider, just as we do with out gold traders.
Earn money on every trade
BullionVault's most active traders pay just 0.05% commission (that's 65 cents on a $1300 ounce) when they trade. If they're picking up a $2 spread and paying 65 cents each side, then round-tripping an ounce of palladium on a stable $1300 price earns them $0.70. This means that on an unmoving price you can earn money by providing liquidity.
There are very few systems in the world that let participants access the spread. With trading "costs" effectively locked in as profit, this access to the spread means that you can take home all the profits from your trades on the fluctuations in the prices of platinum or palladium, without commission eating into the margins.
Professional traders don't put up with wide dealing spreads, VAT sales tax, worries about storage, high insurance costs or a lack of buy-back quotes. The wholesale market is where the 'spot' price of platinum is created. BullionVault enables you to join it simply and quickly online. The cost savings are dramatic.
Using BullionVault to buy platinum or palladium, you'll benefit from the low costs and high security enjoyed by miners, refiners, banks, brokers, industrial users, jewellers, auto-makers and technology companies. Like them, you will buy and sell platinum held in large bars, all meeting the 'Good Delivery' standards of professional trade body the London Platinum & Palladium Market (LPPM), and all stored in approved, specialist vaults.
BullionVault is the cheaper, safer, and most accessible worldwide market for the trading of privately owned bullion. There is no fairer proposition to the platinum or palladium trader. But please, always be aware that - as in any market - there are risks and swings, and those new to trading should carefully research their intended positions.
For more about the history of the platinum and palladium market, how it's grown and what it offers today, read on...
Platinum and palladium as commodities
Both platinum and palladium are incredibly rare and unusually useful. They share properties of resistance to corrosion, an ability to absorb high levels of hydrogen, excellent electricity conduction and high melting points. That combination gives the metals industrial and automotive uses that underpin their value as commodities and their use in investments and high-price jewellery. Learn more about the discovery, mining and uses of platinum - from catalytic converters to cloud computing.
But in brief, a "new" white metal was "discovered" by Spanish conquistadores in South America in the 16th century (it had in fact been worked with skill in the region for hundreds of years). The metal - platinum - was viewed by the colonisers as an annoyance, with alluvial deposits of the silvery-white substance interfering with the real business of panning for gold.
The "making" of platinum as a valuable commodity was in a series of discoveries by European scientists. Heavier than gold and virtually impossible to melt, the qualities that had for centuries made platinum so difficult to work now made it attractive for industrial uses, from glassmaking to the manufacture of laboratory instruments.
The discovery of palladium and the birth of platinum "commodities"
In the nineteenth century, new refining techniques led to an increase in industrial applications for platinum, from batteries to munitions. Meanwhile palladium was discovered in London in 1803, after a series of experiments extracted the metal from a platinum base.
At around the same time, the independence of Colombia from Spain led to a block in platinum supply to Europe, but new deposits were found in the Ural mountains in Russia. Many of these sources also contained alluvial deposits of platinum, alloyed with gold or other platinum group metals.
With little demand for platinum in Russia for jewellery, industrial or scientific use, the Russian government decided to make platinum into a monetary metal by producing platinum coins. Almost 500,000 ounces of platinum were minted, as the world was introduced to the notion that platinum was not just a commodity, but was also, like gold, a store of value.
Modern platinum trading
With the metals still scarce and difficult to access, and uses in electric and medical processes and the automotive industry increasing, the 20th century saw a step-change in the use of platinum as an investment.
In 1956, over a century on from the platinum rouble, the New York Mercantile Exchange introduced platinum futures. While futures offered a standard and liquid outlet, the highly leveraged nature of futures trading meant that individual investors faced a high risk of losing a large share of their investment due to small changes in the price of the metal, platinum futures contracts are today held by industrial hedgers or major speculators.
The Nymex (New York Mercantile Exchange, now incorporated in the Comex market of the Chicago Mercantile Exchange) represents the major exchange for these precious metals worldwide.
Platinum and palladium bullion
The first platinum bullion bars were not minted until 1975, in Japan, after the Arab oil embargo saw a spike in precious metal prices. Small five and ten gram bars could be bought by individual investors for as little as $100.
With platinum's huge price changes during the late 1970's and early 1980's interest in platinum bullion investing spread to Europe and the United States, with that decade also seeing a proliferation of platinum coins introduced by national mints worldwide.
Palladium followed a similar, later, trajectory, and as platinum and palladium prices soared, after centuries with few investment choices, the platinum investor now can choose between legal tender coins, bullion bars, ETFs, futures and options.
At a time when industrial uses have once again changed shape, with platinum and palladium's widespread use in catalytic converters, computers, dentistry and defibrilators, the utility of the metals means we can deduce that as countries become wealthier, they need spend an increasing share of that wealth on platinum and palladium.
The palladium boom
Platinum and palladium usually performs better during times of economic growth. When manufacturing and industry boom, platinum and palladium prices often do, too. They also soar during times of technological development - as new applications are found for a pair of metals that have very specific and unusual properties.
Even if the West enters recession amid geopolitical uncertainty and economic shock, somewhere in the world needs palladium. It has been estimated that the gap between supply and demand of palladium is approximately 915,000 troy ounces and rising. The palladium price graph, though, is volatile. Having dipped to $160/oz in the wake of the 2008 financial crisis, Palladium broke the $1,000 barrier in 2017, peaking at nearly $3,000 in 2021, before moving back. But, as many traders know, the profits can be made from week-to-week movements rather than long-term hedges. Which is why it pays to keep trading costs low.
Predicting the market
The aim of commodity trading is always to predict which direction the market will move in. The further the market moves in the direction a trader has predicted, the more they profit.
This type of trading is seen by some investors as a less volatile, longer-term alternative to currency trading (forex). The principles are the same, but while forex traders will look to exploit short-term price fluctuations, platinum and palladium traders - like gold traders - look to benefit from their insights into longer-term trends, although platinum and palladium are typically more volatile than gold.
With BullionVault, when you buy platinum or palladium, you actually own the physical precious metal. While it is likely to be both safer and easier to trade while in a vault, you can even - should you wish - take delivery of the physical metal you've bought (although that will have tax implications). You can also, as noted above, make unlimited trades while earning the spread.
BullionVault vs ETFs
There are no management fees for investing in precious metals with BullionVault, and investors may find that the annual costs for ETFs (Exchange Traded Funds, which are, as the name suggests, managed funds with management fees) are higher than BullionVault's low storage fees.
It's also worth mentioning that, unlike in 1980s Japan, investment bullion is not available in 5 gram bars. In the wholesale market, you will buy and sell platinum held in large bars, all meeting the 'Good Delivery' standards of professional trade body - the LPPM - and stored in approved, specialist vaults.
The Good Delivery rules allow these bars to weigh from 1 to 6 kilograms (32 to 193 ounces). New bars today typically weigh around 5 kilos (155 ounces), which as of summer 2023 means they would cost $160,000 each.
Of course, that is beyond the investment appetite of most private investors. But on BullionVault, you can buy or sell as little as 1 gram at a time, holding your investment as part of an undivided large bar. This way, you own your metal outright, but you benefit from the wholesale market's much tighter spreads between prices to buy and to sell.
Buying platinum in Good Delivery bars also makes it much simpler and cheaper to store and insure. Starting from 1 gram at a time, BullionVault enables you to share these benefits too, enjoying fully insured storage inside specialist vaults recognized by the professional market's biggest players.
Trading online with BullionVault
The other key 21st century development in gold trading is the ability to buy and sell online. BullionVault customers can trade precious metals online 24/7 anywhere in the world.
Using BullionVault's app, customers can buy and sell in a selection of major currencies (US dollar, UK Pound, Euro, Yen), and can change the buying and selling currency to optimise exchange rates.
Trading gold online has opened up the market to private investors. With BullionVault, individuals can benefit from the same access to gold trading as a market professional.
BullionVault posts live dealing prices on public internet pages 24 hours a day, seven days a week. You can see the current price of gold, silver, platinum and palladium in multiple currencies and vault locations on the live order board.
Choose the spread
When you trade gold using BullionVault, you choose whether to post limit prices (earn the spread) or accept other peoples' posted prices (pay the spread - usually about 0.25%).
BullionVault allows trading directly in US Dollars, British Pounds, Euros or Japanese Yen. Users of these currencies incur no currency conversion costs as they deal directly with counterparties trading gold in the same currency.
Dealing larger amounts
BullionVault also allows users to trade whole bars, directly on the professional bullion market. Trading of this nature must be conducted during London market hours but there is no limit to the size of trades other than the depth of the professional physical bullion markets.
Physical precious metals
Bullion bars and coins may seen old fashioned in the world of options, futures and funds based on the precious metal, but it still represents a popular investment as a long-term position or as a way of diversifying risk.
Precious metals can be bought through BullionVault, the world's largest online investment gold service, which takes care of £3.1 billion in assets ($3.9bn, €3.6bn, ¥571bn) for over 100,000 customers who can trade silver, platinum, palladium and gold 24/7.