Guide to platinum

Platinum Bars & Coins

Platinum coins and bars have yet to become popular investments in Western markets, and have only really gained attention in Japan. Analysts blame high premiums to spot prices, plus heavy discounts when you want to sell, because the market lacks good buy-back offers from retail dealers.

VAT then more than doubles these trading costs for investors in Europe, adding a further 20% sales tax to the price of platinum coins and small bars.

These barriers mean private investors missed the doubling of platinum prices just ahead of the financial crisis in 2008. Longer-term, the high cost of coins and bars has blocked people from accessing platinum's underlying price rise, gaining 4.6% per year over the last quarter-century.

But there is now a way you can sidestep VAT on platinum. You'll also reduce your dealing costs to a fraction of how much you'd pay buying coins or small bars. You can then sell at live prices, and for full market value, the moment you choose.

Platinum coins and bars: Little history as money

Discovered only in the mid-18th Century, platinum today has many unique and irreplaceable uses across the transport, energy, chemical and medical industries.

Lacking gold or silver's history of widespread monetary use however, platinum remains a smaller market for investment, and coins account for only a small part of that – as little as one-tenth in most years. That's because platinum coins still carry very high costs to investors, and also lack steady supply, itself the result of low demand and low stock levels.

Some investors choose to buy small platinum bars instead. Typically weighing more than the 1 Troy ounce standard for platinum coins, these bars have a lower price per gram and carry lower manufacturing costs too. But again, private individuals face a limited range with poor availability, and costs remain very high compared to other investments.

You must also look at the cost of selling as well as buying. In physical platinum, expect to get 1-6% or worse below the prevailing spot price when you come to sell coins or bars – if you can find a buy-back price at all. The retail market for platinum coins and small bars, says specialist consultancy Metals Focus, struggles to find new investors because it offers "few buy-back opportunities, large bid-offer spreads [and] high premiums."

More costly still, investors in Europe face Value Added Tax (VAT) on platinum coins and bars. It applies at the full rate, just as it does on the other 'industrial' precious metals of silver, palladium and rhodium.

Private investors cannot reclaim VAT when they come to sell. But you can avoid it entirely – as well as slashing your trading costs – by quitting the 'retail' market of platinum bars and coins, and going directly to the wholesale bullion market instead.

Platinum coins

Country Dealer's % premium to spot VAT % on purchase price Buy-back % discount to spot Total % cost to the investor
US 5-9 0 1-2 6-11
UK 10-20 20 2-3 34-47
Germany 7-15 19 0-1 27-38
Switzerland 10-30 19 3 34-57
Singapore 9-29 0 4-5 13-34

Source: BullionVault research, comparing a range of published retail quotes

Platinum bars

Country Dealer's % premium to spot VAT % on purchase price Buy-back % discount to spot Total % cost to the investor
US 2-4 0 1-2 3-6
UK 8-10 20 2 32-34
Germany 8-14 19 1-3 30-39
Switzerland 8-9 19 2-5 30-37
Singapore 5-6 0 4-6 9-12

Source: BullionVault research, comparing a range of published retail quotes

Another way to buy platinum

Because of how much these costs add to coin and small bar prices, barely 5% of the platinum mined each year goes to make retail investment products. The other 95% goes to practical physical uses, transformed by specialist companies into products vital to modern life.

Most platinum today, in order of demand, goes to auto-catalysts for cutting diesel emissions, then the jewellery industry, chemicals production, medicines and biomedics, petroleum refining, glass-making, electricals and also to fuel cells – a 'clean energy' replacement for carbon-burning engines.

When buying new supplies for the manufacture of their products, these users don't pay a 5% premium to spot prices like buyers of small platinum bars do. Nor will platinum refiners, after refining a catalyst from a scrapped car or recycling the thermo-couple from a petro-chemicals plant, accept the 3% discount offered to coin investors when they sell.

Instead, these professional platinum users get the tightest prices, and deal for the lowest costs, by trading platinum in wholesale units. It's the market in large bullion bars – weighing between 1 and 6 kilograms (32-193 Troy ounces) – that creates the 'spot price' of platinum, against which all retail investment products are sold at a premium or bought back at a discount. That's because, just like engagement rings or glass-making tools or the chemically-treated form of platinum used in autocats (known as 'sponge'), platinum coins and small investment bars start out as metal inside these large wholesale bars. Making them adds costs to the platinum traded in that ‘raw’, wholesale form.

BullionVault lets you access this wholesale market directly, buying or selling as little as 1 gram of platinum at a time. This cuts out all the stages of fabrication, handling, shipping and retailing which add to the cost of buying platinum coins or small bars. BullionVault's membership of the professional market also means you don't have to pay any VAT, not unless you choose to withdraw your platinum from safe storage into one of London's world-leading vaults.

The savings are dramatic, slashing the gap between what you spend and what you get back on sale. Instead of losing up to 11% as US coin buyers do, BullionVault users trade platinum for a fee of just 0.5% maximum each time they buy or sell. That saves European investors 95% or more of what they'd lose trying to trade platinum coins and small bars in the retail market, where they must pay VAT but cannot then reclaim it.

You can review BullionVault's full list of costs, including the monthly charge for storing your platinum inside accredited London vaults, on the full tariff here.

How the large-bar platinum market works

Using BullionVault, every gram you own is held in the form of a large wholesale bar, meeting the Good Delivery standards of professional trade association the London Platinum and Palladium Market (LPPM).

Each bar – also known as a plate or ingot – must be 99.95% pure platinum or better. Smooth in appearance, with no pits or cavities, the bar must carry a stamp showing its purity, the brand-name or mark of the refiner, a unique serial number, and the year it was made.

Once made, each large platinum bar must stay inside market-approved storage. Fully insured at a fraction of the cost you'd pay to rent a safe-deposit box, this also costs less than properly storing and insuring high-value coins or small bars at home.

Besides saving you the worry, hassle and cost of trying to arrange safe storage elsewhere, these specialist vaults bring two other clear benefits:

  • Sell for full value: Because they stay inside approved storage until sold to a final end-user, Good Delivery platinum bars carry a warranty of quality. That means they trade for full market value, without the discounts suffered by coins or small bars that they circulated in private hands, outside the professional circuit. Any problem with a Good Delivery bar is made good by the original refinery. The buyer is never at risk.
  • Sell when you choose: Because the metal traded on BullionVault stays safely inside the vault, you don't have to deliver or ship your metal anywhere to sell it. The live online market is open 24 hours a day, every day of the year. So you can sell your platinum any time you choose, trading 1 gram upwards. No waiting for a retailer to open, and no having to shop around to find a buy-back quote for a coin or small bar.

These simple advantages have made BullionVault the world leader in physical gold and silver trading for private investors online. Now offering VAT-free platinum, it makes this uniquely valuable precious metal investable for private individuals.

To learn more and get started today, simply register your email address to open an account now.

Please Note: This analysis is published to inform your thinking, not lead it. Previous price trends are no guarantee of future performance. Before investing in any asset, you should seek financial advice if unsure about its suitability to your personal circumstances.

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