Did you ever see a pretty platinum-and-diamond ring, and wondered if you could buy the precious metal in any other form? Just as with gold, there are modes of buying platinum outside the traditional jewellery route.
Currently, one troy ounce of platinum is $1567, slightly below gold which is at $1569/ounce. Platinum gets chunk of its demand (almost 60 per cent) from industrial users.
Globally, there are exchange traded funds (ETF) options to invest in platinum. In India, however, investors can choose from the options below.
BARS AND COINS
Platinum is available as coins and bars with many jewellers today, making for easy availability. But with an eye on returns, this is not really the best mode. There are several reasons for this. One, purity on the metal is not guaranteed. Two, the wastage charges at the time of re-sale will eat into returns.
Three, given that the physical market for platinum is illiquid, you can’t convert it into cash quickly. The fourth problem with physical investment is that you have to look for ways to keep it safe.
Storing the bars in a bank locker will mean shelling out money on rent. And if you don’t already have one, the banker may require you to open a FD account if you request for locker facility.
FUTURES MARKET
Those of you who want to make speculative gains from price movements in platinum can trade on the metal in the futures market.
On a cautionary note, attempt futures trading only if you have a high-risk appetite. Price volatility in the futures market is huge.
Also, the lot sizes here are big (one contract of platinum in MCX is equivalent to 250 grams of the metal) requiring a high initial margin. However, for those intending to take physical delivery, the option is open.
ELECTRONIC SPOT MARKET
Buying platinum in the electronic spot market is the most lucrative way of investing in the white metal. On the National Spot Exchange Ltd (NSEL), platinum (ticker: e-platinum) can be bought in units of one gram and stored in the account in a dematerialised form.
De-mat investment makes the process of buying and selling hassle-free. The exchange’s extended trading hours lets you buy these units at any time between 10 a.m. and 11.30 p.m..
All that you need to do is to open a de-mat account with one of the exchange notified depositories and then get a trading account from any of the NSEL members.
The charges here include the brokerage plus a transaction fee charged on the turnover (Rs 10 per lakh of turnover for delivery-based transaction and Rs 5 per lakh of turnover for squared-off transactions).
If you intend to trade on e-platinum contract, you need not part with the full amount. It is enough if you just pay the initial margin. Initial margin on a contract of e-platinum is 5 per cent now which works out to Rs 154.20 at current prices.
Those of you who intend to take de-mat delivery are alone required to pay an additional margin – and, of course, the full price of the contract. The settlement cycle is T+2, which means the total amount due needs to be settled in two working days.
If you intend to take physical delivery of e-platinum units note that this will entail an additional charge in the form of VAT and other local taxes.
Physical delivery can be taken in the form of bars/coins.
E-platinum tracks platinum price at London Platinum and Palladium markets converted to rupees – rupee volatility will therefore play a role in returns, just as with gold. Do also note that the demand-supply of e-platinum units on the exchange can influence prices thus altering returns for the domestic investor.
TAX LIABILITY
Investment in platinum will draw tax liability under wealth tax and capital gains tax (on gains made in sale). E-platinum units are considered as good as physical holding of the metal and draw tax charges. Long term capital gains (if held for more than 36 months) and short term capital gains will also apply.
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