Issues with Platinum Longer Term

While precious metals like gold and silver have been traded for thousands of years and have very long histories of price performance and charts as well, platinum as far as its being traded on exchanges has a much shorter history, first appearing on the scene in 1987.

That’s over 30 years though and we may think that this is quite a long time to get an idea of how platinum performs, and in cases where one is looking to trade it shorter term it very well may be. If you’re trading platinum on a short term basis for instance, what happened 30 years ago or even 5 or 10 years ago isn’t really going to matter much, but when looking to invest in it longer term it’s a different story.

Issues with Platinum Longer TermWith other precious metals, and just about anything one seeks to invest in, we really need to look at several instances at least of what would have happened if we invested in something longer term, and one instance really isn’t that significant.

If your time frame is 30 years for instance, and you only have 30 years of data, then you really only have one instance of this trade, as opposed to things like gold and silver or the stock market, with their longer trading histories, where you can look at various points in the past and for instance measure what 30 year trades will look like.

Long term investing certainly isn’t limited to periods as long as 30 years, and we might instead define this as 10 years or more, where we’d look to see how investing in platinum with a 10 year time frame has done for instance.

Even with an approach like this, the significantly less amount of data that we have with platinum will reduce our ability to make these comparisons, even though we might want to say that looking beyond this 30 year window is quite far back and may not really be that relevant to today.

There is some truth to this actually, and the longer you look back, the less relevant the information is, but this does not mean that this old information is completely irrelevant. One of the things that we’re interested in with platinum as well as with other precious metals is to compare it’s performance with other markets such as the stock market, to see how the two may differ at times.

When the information we have to use to do these comparisons is more limited, as it is with platinum, this is going to have us operating with less information than if we were comparing the performance of gold with other markets for instance, and while this may not be a huge deal, it will still matter somewhat on longer term time frames.

Long Term Predictions About Platinum Using Fundamentals

Predicting prices with long term investments as far out as we need to is plenty challenging indeed, and this is the case with gold and silver as well as platinum. If someone wishes to invest in platinum and seek out long term time frames, which we’ll define as 10 years or more, it’s just hard to tell where the price will go over this time.

We might think that if platinum or another investment looks good right now from an fundamental perspective, we might be able to assume that this positive outlook will continue for 10 years or more, but this is at best just a guess, and we really can’t afford to guess too much here.

When we do this, what we’re doing is putting ourselves in a position to ignore what happens over our investment time frame, if we’re not going to let price guide us instead of these guesses which can become pretty dated over this long of a time.

We can adjust our views based upon changing fundamentals, but that would have us leaving our long term outlook and move to a shorter one. One of the big problems of long term investment horizons is that to be true to the strategy, we’re going to have to ignore both technical and fundamental data of a shorter term duration in order to put this plan into action as intended.

People do change their views mid stream with long term investing of course, intending to hold for the long term but later finding themselves regretting this decision enough to at least consider ditching the investment, as well as actually closing their positions.

If a plan is subject to being abandoned though, and the likelihood of this occurring is significant, this should give us pause for thought as far as whether the strategy we’re using will manage contingencies well enough, and longer term platinum investing certainly would have us doing this at various times.

Fundamental analysis with something like platinum is extremely complex at best, as we have to look at a number of different things, mostly macroeconomic and intra-market factors, and this is all well beyond the abilities of individual investors. It may even be beyond the ability of anyone, even people who devote their careers to this, and the best we can do is make some decent educated guesses in the near term. The long term involves so many unknowns though that we’re now down to pretty much pure guesses at this point, and since successful investing does involve establishing a probabilistic advantage over a certain period, this advantage must be significant enough to make sense of the investment strategy.

There really isn’t any way to do that with platinum using fundamentals over such long periods, and we can’t even use macroeconomic trends, which we can predict better, because platinum often has a life of its own and the correlations just aren’t anywhere near strong enough to do this, like they are with the stock market for instance.

Long Term Technical Trends with Platinum

We might instead take a long term technical analysis to seek to predict and manage platinum investing in the longer term. We can do this with other instruments as well, and when we do so, we can at least set ourselves up to be able to react to the bigger moves in the market which should have us changing our outlook.

We can never set arbitrary holding periods with this strategy though, and how we differentiate with longer term and shorter term technical market data is to employ greater smoothing techniques to the data, having us riding out less significant moves in the longer term and only exiting when the moves are large or predictive enough.

When we seek to impose actual holding periods, even desired ones, this may not match up with reality very much, and we must instead always allow the performance of the investment to ultimately decide how long we hold it.

The amount of time that we hold a trade on a technical basis is a matter of what the market decides, for instance how long a 200 day moving average would have us in an investment, and if we seek what the holding periods will be using such a system, we need to look at historical data and calculate average holding times.

Platinum is plenty volatile though and when we look at the chart data that we do have, even an expected holding of 10 years really doesn’t pan out very well. A lot can happen with platinum in 10 years and we can’t just sit by idly and wait for things to play out, or set indicators so wide that they will neither provide an advantage as far as expected return goes, and will also involve taking on a lot more risk than it makes sense to.

Looking at the length of past trends is the best way to gain insight as far as what we should be expecting here by incorporating a solid plan that does prove profitable over time and doesn’t take on too much risk.

When we do this, we can see that an ideal approach in the past should we wish the longest profitable term would have our positions held for an average of about 5 years, with some involving holding for less than a year and others lasting as long as 7 years.

Going as long as 10 years on average really isn’t going to be anywhere responsive enough, or at least hasn’t proved to be, and this is due to the fact that platinum really hasn’t shown that it moves up all that much over time and is also shown that it is very volatile.

Platinum’s Performance over the Long Term

If you had bought platinum back when it first hit the exchanges about 30 years ago, and still held it, you would show a pretty decent return of about 35%, but this is over a very long period of time and this doesn’t even cover inflation, so your net return would actually be negative.

Along the way you would have experienced a wild ride, which manifested itself in a way that you would want to take advantage of these moves, and this is actually where the potential is with something like platinum, to time the market and capture the higher rates of return that this strategy can provide us.

People often just invest in something and don’t even think about it much other than getting upset when it moves against them too much and they either show losses or give back a lot of their gains.

This is not the way that we should ever invest in anything though, and while we can get away with this with stocks, platinum is a different animal, and is even more volatile and does require proper market timing even more.

It’s still possible to do well long term with platinum by just holding it for a period of, say, 10 years, but we haven’t really seen a period yet where this strategy would have worked out all that well, especially compared to the returns that could have been made by putting our money in the stock market instead.

This does not mean that we should not consider investing in platinum, and at the right times platinum investing can be pretty lucrative indeed, especially if you take short positions in it as well as long ones.

This is not a hands off investment though and in order to both profit and manage risk properly we’re going to need a shorter term view than even 10 years and also have a plan that adapts to changing market conditions well enough.

This is not outside the reach of individual investors though, and with only a modest amount of skill and knowledge, we can put ourselves in much better positions to succeed with our platinum investments, but none of this involves just buying and holding it longer term though.



Monica uses a balanced approach to investment analysis, ensuring that we looking at the right things and not confined to a single and limiting theory which can lead us astray.

Contact Monica: [email protected]

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