How Is the Russian Conflict Affecting Platinum?

As we enter the 15th day of the Russian/Ukraine war, the entire world has already felt its economic shockwave. In response to the instability of oil prices and threats of supply chain disruptions, the precious metals market has also acted similarly. The oil market has been highly volatile this week, wildly swinging up and down, spanning a $33 range. 

This week there have been recorded highs for both gold and palladium. Russia produces 40% of the world’s palladium and is the world’s largest producer. The palladium price has climbed more than 37% since the Russian conflict began. Gold is closely tied to the oil price and has climbed 6.4% since the Russian invasion. No one was surprised to see palladium and gold climb to all-time highs. Both metals are uniquely tied to Russia and their prices have grown appropriately.

Palladium is in the platinum metals group and is often mined from the same mines as platinum. Both metals are more frequently mined in South Africa than in Russia. The two metals share many molecular properties making them very similar in their uses. Investors want to know what’s next for platinum. Platinum has silently been making significant gains this year. It is already up 16.1% in 2022 and up 4.2% since the start of the Russian conflict. Only 10% of the world’s platinum comes from Russia. The United States does not import any Russian platinum. The market hasn’t responded to platinum the way it has to palladium. This means the growth in platinum is not based on market fears concerning Russia, but on a larger supply issue trend existing before the Russian problem. The Ukraine conflict has only worsened the supply crunch.

Although palladium represents most catalytic converters in gasoline engines, platinum is used in most diesel engines. The palladium supply chain issues and high prices have car makers looking to see where platinum can be substituted. It is estimated that between 25-50% of palladium requirements could be substituted with platinum. If palladium gets too expensive or too hard to find, the auto industry will undoubtedly move what they can to platinum. The decision is not just the cost difference between the metals but also the effectiveness instead of ever-increasingly stringent emission standards. Suppose the auto industry decides to switch to platinum. In that case, there will be increased demand and there will be a hefty investment expense to redesign the cars and retool the manufacturing assembly lines to use platinum. This highly probable switch will lead to significantly higher platinum prices.

The risk to platinum is the electric car market because there is no use for platinum in an electric vehicle. It will be several years before there is widespread adoption of electric vehicles. Ford estimates that by the year 2030, 40-50% of their car sales will be electric vehicles. When there is widespread electric vehicle adoption, it is anyone’s guess the demand or price of platinum. In the meantime, the world will continue to drive carbon emitting vehicles requiring platinum and palladium to reduce the emissions. Until the world goes completely electric, it is a safe assumption platinum and palladium will continue to be used to help us breathe clean air.

Platinum may be a good addition to your precious metals portfolios, but before investing platinum, there are some things to consider. Platinum bullion is not a good idea if you have not already diversified your portfolio with gold and silver first. Like any investment, it should be a just a small part of a larger financial plan, not the entire plan (i.e. having a diversification strategy across asset classes and within asset classes). It is not a good idea to invest in platinum bullion if you can not handle large price swings and frequent volatility. To determine your investment risk and your ideal portfolio you can use our portfolio builder tool.

Investors that are looking to hold for the long term or do not like volatility tend to invest in the proof 70 coins. Investment grade Platinum Eagles in perfect proof 70 condition are valued for their rarity and do not go up and down in price with the market. Instead, their value is more stable over time than platinum bullion and have a solid track record of consistent year over year double digit growth. The U.S. Gold Bureau recommends these coins as a long-term store of value, to help protect your portfolio from turbulent economic times. The investment grade platinum coins offer exposure to platinum without having to worry about the day-to-day volatility. Also, these are an overwhelming favorite of people looking to pass down wealth to the next generation.  

On March 17, 2022, the U.S. Gold Bureau will begin selling the 2022 platinum American Eagle PF70 coin with the Ed Moy signature label. The 2022 will be the second in the 1st Amendment commemoration series celebrating the freedom of speech. The 2021 Platinum American Eagle celebrated the freedom of religion.

There will not be very many opportunities to own this piece of American history in a perfect proof 70. The entire mintage produced from the U.S. Mint came in at only 15,000. Due to the platinum’s relative hardness as a metal, only a very small percentage of the mintage that will achived a perfect 70 grade. To aide in your research we have a handy chart of the past performance of Platinum American Eagle Proof 70 coins. Ensure you don’t miss out is to call your private metal advisor at 800-775-3504 or you can sign up to be notified when the platinum coins are available.