Costco Members Are Buying Platinum. Should You?
Following the popularity of gold and silver, Costco recently added platinum bars to its precious metal offerings. While it hasn’t sparkled as much as those others this year, its fundamentals look rock solid.
Platinum is a “newer kid on the block,” said Edward Sterck, director of research at World Platinum Investment Council. It was only really identified in the 19 th century because it is always found in ores alongside other metals and has a very high melting point, according to Sterck. It is also about 30 times rarer than gold, he added. That also means investors aren’t as familiar with platinum as an investment. The size of the platinum investment market is still a fraction of that for gold and silver, according to Robert Minter, director of investment strategy at Abrdn, which manages the largest platinum exchange-traded fund on the market.
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Still, retail interest in platinum has been robust lately. In the first half of this year, investments drove demand for about 579,000 troy ounces of platinum, or about 13% of total demand, mostly through ETFs, according to Metals Focus. The metal, though, hasn’t shined the way that gold and silver have so far this year. Prices have declined about 1.5% year to date. Gold and silver are up 29% and 32%, respectively.
That is despite platinum demand exceeding supply last year. Metals Focus expects that deficit to widen in 2024. Part of why platinum pricing has been weak might be because of its in-between positioning as a green metal. A bulk of platinum demand—between 30% to 44%—comes from the automotive industry, where it is used in catalytic converters used to reduce tailpipe emissions, according to the World Platinum Investment Council. Over the past few years, expectations that platinum-less electric vehicles would take over internal combustion engine cars cooled sentiment on the metal.
Additionally, several automakers had built up platinum inventory post-Covid, especially in early 2022 as insurance against supply disruptions after Russia’s invasion of Ukraine, according to an investor presentation from Anglo American Platinum. Russia is the second-largest miner of platinum behind South Africa.
Demand for platinum from the automotive industry has been strong, growing 17% from 2019 to 2023, according to data from Metals Focus. Demand for conventional cars has been resilient, and growing quickly for hybrid vehicles, which actually use even more platinum-group metals. Internal combustion engines in hybrid cars are used less frequently and therefore often start cold, which results in higher pollution and requires more platinum to convert harmful gases.
The car industry probably won’t wean itself off platinum for some time: Hybrid vehicle sales in the U.S. outpaced EV sales last year and are on track to do so again in 2024, according to Edmunds. Automakers have pulled back investment in EVs and are instead increasing hybrid car production. Platinum demand has also been stronger than expected because the auto industry has shifted from the relatively more expensive palladium to platinum on gasoline cars.
Meanwhile, other industrial demand—sectors ranging from chemicals, petroleum, medical to glass—have been resilient over the past few years. Platinum’s role as a catalyst in hydrogen is worth watching, too, though that industry isn’t big enough to drive substantial demand just yet.
Meanwhile, industry watchers say platinum supply isn’t likely to increase soon. This is partly because platinum is always mined alongside other metals. Weak palladium and rhodium pricing has put economic pressure on mining companies, limiting the amount of platinum that gets mined alongside them, according to Sterck. Frequent power outages in South Africa, which produces about 70% of the world’s mined supply, have also weighed on supply over the past few years.
Moreover, recycled platinum supply from scrapped cars has been declining every year since 2021. One reason could be that cars simply are on the road longer. They are more durable, and motorists are holding on to them because of ballooning monthly payments on new vehicle purchases. The average age of cars in the U.S. has been rising steadily and reached a record high of 12.6 years in 2024, according to S&P Global Mobility.
For now, aboveground inventories could absorb the deficit. But such stocks declined 15% in 2023 and are expected to draw down again by 25% in 2024, according to Metals Focus. J.P. Morgan expects platinum prices to reach $1,200 per troy ounce later in 2025, from today’s price of around $994/ozt. Citi expects prices to rise to $1,100/ozt over the next six to 12 months, noting that the market is likely to stay in deficit over the next two years. Another potential catalyst is the Fed’s interest rate-cutting trajectory, if lower rates spur more car purchases.
One thing Abrdn’s Minter cautions: Physical platinum bars being snapped up—just like gold and silver—can be trickier to sell than ETFs. Investors can easily lose 10% of the metal’s value by selling to a dealer, he said. That is because the dealer takes on a lot of risk by buying from retail investors. “Investors do a tremendous amount of research when they buy something like an ETF, but they don’t look at the cost to sell that bar of platinum from Costco,” he said.
Platinum looks like a solid commodity to have in your basket, but in this very rare instance, Costco might not be the best deal in town after all.
Write to Jinjoo Lee at jinjoo.lee@wsj.com