Gold and silver tend to dominate discussions around precious metals IRAs. However, other approved metals like palladium and platinum can also diversify a retirement portfolio when allocated judiciously. While less mainstream, understanding the benefits and risks of platinum and palladium can support more informed self-directed IRA investing.
Overview of Precious Metals IRAs
A precious metals IRA functions similarly to a traditional IRA, with the key difference being it allows investment in physical gold, silver, platinum, and palladium instead of paper assets. Popular holdings include:
- Gold coins and bullion
- Silver coins and bullion
- Platinum coins and bullion
- Palladium bars and rounds
Metals are stored at a specialized custodial facility. Growth remains tax-deferred, and withdrawals follow IRA rules. Investors see precious metals IRAs as a hedge against inflation and market volatility.
The Case for Platinum
While gold garners most investor attention, platinum offers unique attributes that may complement a retirement portfolio when allocated selectively:
Higher Density
Platinum has a higher density than gold, making it more rare. All platinum ever mined could fit in a small room. Limited supply supports long-term value.
Industrial Utility
Platinum is essential for industrial uses like catalytic converters. This tangible utility bolsters fundamental demand. Around 30% of platinum demand stems from industrial applications.
Automotive Exposure
Platinum use in vehicle catalytic converters and electronics gives it leveraged exposure to the auto industry. Rising global vehicle sales may drive gains.
Jewelry Demand
Platinum’s white lustrous appearance makes it desired for fine jewelry, driving steady demand. Over 30% of platinum demand comes from jewelry buyers.
Diversification
Platinum’s unique supply/demand profile provides diversification for a precious metals portfolio concentrated in gold and silver. It acts as an outlier.
Platinum coins and bullion can potentially enhance overall returns when judiciously blended into an IRA, although higher costs apply.
The Investment Potential of Palladium
Like platinum, palladium is a lesser-explored precious metal for retirement investors but offers advantages that could enhance a portfolio:
Limited Global Supply
Palladium has a very concentrated supply, with Russia producing over 40% of the world’s mine output. Tight output supports prices amid any supply disruptions.
Substitution for Platinum
Palladium can substitute for platinum in industrial uses like catalytic converters. Rising platinum costs have fueled substitution demand for palladium.
Energy Exposure
Palladium is used in electronics and emissions control devices for fossil fuel vehicles. Palladium demand rises and falls with global energy consumption.
Volatility
As a thinly traded precious metal, palladium sees high volatility with prices spiking dramatically at times when supply or demand shifts. This provides opportunities.
Portfolio Diversification
Palladium diversifies the precious metals slate alongside gold, silver, and platinum with its distinct supply and demand attributes.
1-5% palladium allocations in an IRA provide diversification and growth potential from market imbalances. But it remains a speculative asset.
Key Factors When Investing in Platinum
Important considerations around platinum include:
- Prices: Platinum costs about 40% less per ounce than gold presently, but carries higher premiums for coins and bars.
- Liquidity: Platinum products may have lower immediate liquidity than gold and silver. Spreads can be wider.
- Storage: Platinum is 30 times more dense than gold and may have higher storage costs due to insurance requirements.
- Supply/Demand: Over 60% of platinum supply comes from South Africa, creating output vulnerability. New catalytic converter technologies could reduce automotive demand.
- Volatility: As a smaller precious metals market, platinum is subject to larger price swings on shifts in supply and demand.
Conservative 1-5% IRA allocations to platinum allow tapping upside while limiting risk from volatility.
Palladium Investment Considerations
Key factors to weigh with palladium include:
- Pricing: Palladium costs 70-80% less per ounce than platinum presently. Coins and bars carry substantial premiums.
- Liquidity: With lower trading volume, palladium may be harder to buy and sell at optimal prices than gold and silver.
- Storage: Palladium is less dense than platinum, but storage fees are still higher than gold due to insurance requirements.
- Supply: Russia dominates palladium mine production at over 40%. Supply disruptions could spike prices. Recycling partially offsets this.
- Volatility: As the smallest precious metals market, palladium sees wild price swings as demand fluctuates.
1-5% palladium allocations provide portfolio diversification while capping risk from volatility spikes.
Comparing Platinum and Palladium Storage Fees
Higher density makes platinum and palladium more expensive to store than gold or silver. Annual storage costs reflect insurance requirements against loss. Expect to pay:
Platinum: 0.75% – 1% of holdings value
Palladium: 0.75% – 1% of holdings value
Gold: 0.5% – 0.75% of holdings value
Silver: 0.5% – 0.75% of holdings value
Evaluate fees across IRA providers, as costs can vary. The higher expenses for platinum and palladium underline prudent allocation percentages.
Key Takeaways on Platinum and Palladium IRAs
Despite playing second fiddle to gold and silver, platinum and palladium may merit selective consideration to round out an IRA’s precious metals holdings:
- Platinum provides a high-density inflation hedge and leveraged automotive/jewelry exposure.
- Palladium diversifies supply reliance while providing a geopolitical hedge.
- Both serve as speculative portfolio diversifiers but require astute investment timing.
- Higher costs and volatility necessitate modest allocation percentages under 10%.
- Blending platinum and palladium into a broader metal portfolio allows tapping potential upside.
In the right circumstances guided by diligent research, platinum and palladium could enhance overall returns while optimizing an IRA’s precious metals diversification.
Frequently Asked Questions
Q: Are platinum and palladium coins eligible for a precious metals IRA?
A: Yes, certain coins like the American Platinum Eagle and Canadian Platinum Maple Leaf are approved for IRAs.
Q: What percentage should platinum be in a precious metals IRA?
A: Experts recommend keeping platinum to 5% or less of total IRA holdings due to higher volatility.
Q: Can I store platinum and palladium IRA metals at home?
A: No, IRS rules require approved precious metals be stored at a specialized depository custodian.
Q: What are the best palladium coins for a precious metals IRA?
A: The Canadian Palladium Maple Leaf is a recommended palladium coin option. Palladium Eagle coins are also eligible.
Q: Are platinum and palladium ETFs allowed in an IRA?
A: No, platinum and palladium ETFs don’t qualify. Only physical coins and bullion can be held in a metals IRA.
Resources
IRA-Approved Platinum Coins – JM Bullion https://www.jmbullion.com/ira/platinum-coins-ira/
Platinum Eagle Coin Information – U.S. Mint https://www.usmint.gov/coins/coin-medal-programs/american-eagle/platinum-coins
Palladium Maple Leaf Coin – Royal Canadian Mint https://www.mint.ca/store/coins/1-oz.-pure-palladium-coin—maple-leaf-2022-prod4060001
Platinum and Palladium ETFs and ETNs – ETF Database https://etfdb.com/etfs/commodity/precious-metals/platinum-and-palladium/
5% Asset Allocation to Platinum – Advantage Gold https://www.advantagegold.com/platinum-ira/
