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What to know before Buying Platinum

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Platinum is gaining popularity, but it has a long way to go before qualifying as an investment option

 

   First, it was gold, then came diamond, and now it is the turn of platinum. These days, platinum bands, pendants and solitaires set in platinum are increasingly getting associated with engagements and weddings in India. The grey-white metal, popular in Japan, the US and China for expensive jewellery, has made its way into Indian weddings -- especially in the urban areas and the metros. Platinum was already popular in the highend customer segment, who prefer setting a solitaire in platinum because of its density. But now even retail buyers are buying engagement bands and pendants because of its attractive pricing. Platinum looks attractive at current price levels. Till recently, platinum was sold at a premium to gold. But, after the bull run in the yellow metal, gold and platinum prices are at the same level today. But is attractive pricing alone a good enough reason to gift your special-one the 'rare' metal? Here are some facts you need to know about platinum before you own one.

Not An Investment

Platinum is still in the process of gaining popularity as compared to gold and diamond in the country. At present, consumption of gold stands at 300-350 tons in India, whereas the consumption of platinum is only 10 tons. Hence remember that the market is not mature enough if you are planning to buy platinum from an investment perspective.


Apart from the platinum market being at a very nascent stage, gold and diamond partially have an Indian origin. Since gold and diamond have traditionally been used in India for making jewellery, so they are still preferred. Platinum is yet to gain popularity as an investment option because of awareness issues.
In case of gold, people have an option to buy gold jewellery/ coins/bars depending upon the end use. They may buy coins today if there is no immediate requirement to buy jewellery. By doing so, they can hedge themselves from a possible price rise. But people do not have any such option in platinum as of today. They have no other option but to buy jewellery.

No Price Benchmark

An investor can track the price of gold on a daily basis, which gives clarity in pricing. However, both in case of diamond and platinum, a buyer cannot track the prices and there are chances that prices may vary for the same quantity and quality of the metal from one jeweller to another. In the case of diamonds, it is often sold on an asking rate. Rapaport price is a loose benchmark for the price of diamonds. The mean price is lower or higher to this price. It is based on external conditions such as demand-supply and foreign exchange. Moreover, De Beers swing the market to a certain degree given that they are a big boy of the industry. They artificially suppress the demand or supply depending upon the market condition. Hence the pricing is not as transparent as gold.


In case of platinum, it all boils down to the tie-up between the jewellers and the vendors. Very few jewellers sell platinum jewellery in India. It is most popular in the urban areas and the metros. Hence, jewelers don't really compete in this segment to form an aggressive pricing policy. It depends on at what cost I source the metal from the vendor.

Hallmarking

Even as platinum is an upcoming segment as compared to other precious metals, hallmarking is already in place for this metal. The Platinum Guild International, which also has a presence in India, has a set of authorised jewellers who sell platinum in India. The list is mentioned on the website of the Platinum Guild India. Apart from the set of authorised jewellers, every platinum product is authenticated by a third party certification by the Underwriters Laboratories, also popularly known as the UL card. So insist on this card from the jeweller, which gives authenticity to your purchase, that too by a neutral party.

Buy Back

The platinum market is at a very nascent stage today. Very selective jewellers are selling platinum in India, hence the buy back policy is not as flexible as in the case of gold. You can exchange it for jewellery only from the same store/ brand you originally purchased from. And you will get back only 85% of the value of platinum.


If you still feel like pampering your loved one or even yourself with a platinum band or a formal jewellery, you can still go ahead. It costs as much as gold. But remember this is just a purchase which may attain some investment value in future. If you are lured just by the look of it and still want an investment quotient to your purchase, you have other similar looking options such as white gold, which has a more matured market in India. If you opt to buy platinum, ensure you buy it from an approved jeweller and get the UL card as well.


Gold

Most analysts expect prices to remain firm or go higher in the medium- to long-term. Whether your objective is investment or consumption, their recommendation is 'buy'

Compared to equities, gold cannot be termed a wealth-creator. Also, emotional factors create hurdles when it comes to selling, making it illiquid in this context

Platinum

Thanks to the galloping gold prices, platinum prices do not command a substantial premium over those of the yellow metal anymore. So, it is as affordable as gold now

The platinum market is at a nascent stage, with just a select few jewellers dealing in platinum, making buy back relatively difficult

Diamond

A rising demand makes diamonds attractive. The difference in prices of gold and diamond is narrowing, making the latter look more affordable

An opaque pricing structure, lack of standardisation when it comes to determining the quality and buy-back go against these precious stones
 

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