Is Platinum A Better Investment Than Gold ?
Is platinum a better investment than gold ?
Gold and platinum are two of the most well-known and widely used precious metals. Both have value in jewelry and industrial uses, either in catalytic converters (platinum) or electronics (gold).
Gold has traditionally been regarded in form of an important financial asset and a beautiful ornament. Platinum is a valuable metal that is used in jewelry and for industrial purposes. Both can be strong investment options, but there are some differences in long-term stability and price volatility.
As a result, a comparison of platinum vs. gold is inevitable. Why does gold cost more than platinum?
Platinum shares many of the same characteristics like gold in chemistry and physics. It’s corrosion-resistant, has a lustrous sheen, and may accelerate chemical processes. Platinum is the chosen metal for several wedding-related jewelry because of its corrosion resistance (platinum ring).
On the other hand, Platinum has a far smaller market than gold. In the above-ground supply, there is less of it. Platinum futures are less actively traded than gold futures (or silver, for that matter).
Platinum’s main application in industry is one of the reasons it is less expensive than gold. Platinum’s demand is limited to Automobile Manufacturers, aside from jewelry and investment.
Automakers use platinum, palladium, and rhodium in catalytic converters to lower automotive emissions. As a result, changes in the Vehicle Market affect the platinum price.
This explains why the platinum-to-gold ratio is so low compared to historical averages.
Diversification is the most appealing feature of platinum in form of an investment. This is especially true if your portfolio already includes gold and silver.
Platinum is a silver-colored metal that is robust and firm, and it is often employed in the production of Automobile and Airplane parts. Gold is a yellowish metal that is commonly used in jewelry making. New investors may question if platinum is a better investment than gold because of words like “the Gold Standard” and “a record going platinum.”
At least in terms of investing, gold is the granddaddy of precious metals.
Other precious metals, like platinum and silver, have a place in a rational investor’s portfolio. They are physical assets that have fair market worth. The Federal Reserve will not be able to print more of them. Both gold and platinum have distinct characteristics. Let’s see which precious metal is a better investment option in our gold vs. platinum comparison.
Investors seeking to diversify their stock, bond, and Cash Portfolios have turned to precious metals. Platinum has been regarded being a more excellent sign of worth and excellence for millennia, owing to its rarity and difficulty in mining. According to US Funds, global gold output was 3,332 tonnes in 2018, but platinum production was just 165 tons.
Among precious metals, gold is by far the most popular investment. Investors of several sizes buy gold to diversify their portfolios, especially in uncertain economic times when the S&P 500 is at risk of collapsing. The yellow metal is long-lasting, bendable, and functions like an inflation hedge. Gold can be bought in the form of jewelry, coins, bars, bullion, derivatives, futures contracts, and gold exchange-traded funds (ETFs).
When there is an economic downturn or crisis, gold prices rise because investors seek refuge in precious metals. It has little growth potential, even if it acts like an inflation buffer. Even after years or decades, a 10g gold coin will continue to be a 10g gold coin.
Nearly half of the gold demand on the earth is for jewelry. The yellow metal is used in the fields of dentistry, electronics, and aerospace. Gold is held in official reserves by central banks due to its perceived worth being an alternative currency.
Because gold is a store of value, its price is determined by the feelings of those who hoard it rather than the principles of supply and demand. Investors sell gold to make the investment in equities and other assets when the economy is growing, lowering its price. They rush to gain gold at times of economic uncertainty, driving up gold prices.
When inflation is strong, gold becomes the preferred Investment. Investors seek safety in the yellow metal due to wars and geopolitical problems.
Platinum is the most valuable precious metal in terms of its material worth. The gleaming white metal is regarded being a powerful emblem of wealth and excellence. In comparison to gold, platinum has a far smaller supply. In addition, it is importantly more challenging to remove than the yellow metal. Platinum has a shorter investing history than gold, which has been used to facilitate commerce since ancient civilizations.
Platinum, unlike gold, is highly malleable. It has a variety of industrial uses. Platinum is used extensively in the automotive sector to create catalytic converters that cut emissions in automobiles, buses, and trucks. Turbine engines, medical gadgets, computers, and the petroleum sector all use it.
While gold is mined in dozens of nations globally, usually all platinum is mined in only two: South Africa and Russia. Any political or economic problems in these countries could have a major impact on platinum prices. Alternatively, the two countries may band together to improve platinum prices artificially.
In comparison to gold, platinum has a far broader spectrum of applications in the business. As a result, its value is determined by supply and demand rather than investor opinion. It has the same properties like other industrial metals like silver and aluminum.
The value of platinum is linked to the overall health of the economy.
The industrial demand for platinum rises when economic and political situations are stable. Its costs fluctuate. When the economy is bad, demand for automobiles, turbine engines, and heavy machinery drop. Platinum prices decline being a result of this.
Because it consumes about half of the world’s platinum, the care sector has an impact on platinum pricing.
After Volkswagen’s emissions scandal broke in 2015, demand for diesel engines began to fall. Platinum prices decreased by as much as 15% in three months being a result.
What’s the Difference Between Gold and Platinum?
Each year, over 190 metric tons of platinum are mined across the world. The two countries that produce the most platinum are South Africa and Russia.
It is more challenging to manufacture because platinum is found lower in the soil and requires a more rigorous purifying procedure than gold. It is a dense yet exceedingly malleable metal used in industrial applications like catalytic converters for automobiles and turbine turbines for airplanes. It’s used in jewelry and medical equipment like pacemakers.
Globally, 3,463 tons of gold were mined in 2019. China, Australia, and Russia are the three countries that produce the most gold. It’s employed in several fields, including dentistry, computers and other Electrical Equipment, aerospace, and, most notably, jewelry and other creative attempts. Because of its perceived worth being an alternative currency, many governments and investors keep gold in large amounts.
|Liquidity||Much lower trading volume|| |
One of the highest-volume commodity trading markets in the world
|Long-Term Reliability|| |
More susceptible to price swings due to lower liquidity, scarcity, difficulty of mining and production, and ties to the auto industry
Price fluctuates, but more stable over time due to its place as a refuge during downturns
|Alternative Currency||Cannot be used in form of a alternative currency||Can be used in form of a alternative currency|
Industrial, auto and airplane manufacturing, jewelry, medical
|Dentistry, computers and electronics, aerospace, jewelry, the arts|
|Price as of June 7, 2021||$1,175 per ounce|| |
$1,897 per ounce
|Volume as of June 7, 2021||9,171||118,913|
|Futures Exchanges|| |
CME Group and the Tokyo Commodity Exchange
CME Group and the Tokyo Commodity Exchange
Gold vs. Platinum: Price and liquidity
Gold and platinum tend to move in the same way over time. However, each precious metal is affected by different variables. The value of platinum is determined by supply and demand, but the value of gold is majorly influenced by market mood.
During economic uncertainty, gold’s role being a haven drives up its price. Platinum prices are falling due to dwindling demand. During periods of continuous economic expansion, the opposite is true.
Platinum is now trading for $986.31 per ounce, compared to $1,568.40 for gold. Platinum is sensitive to supply and demand variations in the current economic climate. Because of trade tensions between the United States and China and dismal global economic development, gold prices have risen.
An inter-commodity spread is the price difference between the two precious metals. Gold occasionally demands a premium over platinum, while platinum sometimes commands a premium over gold. The gold-platinum ratio explains the connection between the two metals and provides insight into market emotion. If the percentage is higher than one, platinum is less expensive than gold, and vice versa.
Gold and platinum are both highly liquid assets. They are readily exchangeable for Cash. They deal in both over-the-counter and physical marketplaces all across the globe.
Gold vs. Platinum: Which is more precious?
Divergences in the gold-platinum ratio present investment possibilities (the price of gold divided by platinum). The ratio was less than one in the past, indicating that platinum was more expensive than gold. However, the current balance is about 1.6, meaning that platinum is cheaper and more appealing.
Although gold and platinum are both valuable metals, they are affected by different variables. Platinum becomes unreliable at this point. The price of gold fluctuates broadly on investor emotion rather than supply and demand. It has lower volatility than platinum.
Another factor to consider is that platinum is exclusively produced by two countries: South Africa and Russia. What happens in these two countires will affect platinum prices across the world. Platinum prices soared to $2,252 per ounce in March 2008 when South African miners experienced power outages. It had dropped to $774 by November 2008. The car industry’s turbulence may have an impact on platinum prices.
We haven’t seen such wild fluctuations in gold prices in a long time. The yellow metal is produced by several countries, including China, the United States, Australia, India, Canada, and others. A supply shortage in one country is unlikely to significantly influence global prices.
Despite the dispute over gold vs. platinum, gold remains the favored store of value. In 2019, however, the yellow metal saw an increase of 18.9%. Investors might choose platinum as an alternative precious metal due to its relative value.
When deciding whether to invest in gold or platinum, consider the following aspects.
An “inter commodity spread” is the price difference between gold and platinum. There have been events when gold has traded at a premium to platinum and vice versa.
Platinum was usually costlier than gold from 1987 to September 2008. In terms of price, gold has surpassed platinum since 2011. 3 Gold traded at $1,897 per ounce on June 7, 2021, while platinum was trading at $1,175 per ounce.
Features and Characteristics
Each metal has its own set of features when it comes to trading. The gold market is quite liquid. On global marketplaces, buyers and sellers trade massive amounts of gold every day. The COMEX subsidiary of CME Group in New York and the Tokyo Commodity Exchange are the two major gold futures markets.
One of the most liquid commodity contracts globally is the COMEX gold futures contract. With around 27 million ounces of gold traded daily.
Gold is traded on both the over-the-counter and physical markets globally.
The NYMEX subsidiary of CME Group in New York and the Tokyo Commodity Exchange are the two major futures markets for platinum. Platinum is traded in both over-the-counter and physical demands, although its options trading volume is far lower than gold. Platinum is more sensitive to price increases than gold due to the difference in liquidity.
Relativity of Prices
Platinum and gold, with addition to other precious metals, tend to move in the same direction. The price difference between the two metals shows supply and demand and economic variables that influence each metal separately, like platinum’s role in the care sector and gold’s role being a haven during economic downturns.
Understanding the inter commodity spread—the difference between the price of platinum and the price of gold—can provide important insights into the current market mood. Divergences often lead to greater trading or investing opportunities.
Is platinum a better investment than gold
Platinum is not a better investment than gold in reality. Gold is more stable and available to mine, and its price does not change like that of platinum. Gold is worth far more than platinum.
Gold is more stable
The demand for gold is more consistent than the demand for platinum. The industries where gold is most often used—Jewelry, Electrical, and medical—are less influenced by economic concerns. Gold’s value often rises during economic downturns!
On the other hand, Platinum’s worth is directly related to manufacturing, especially the production of catalytic converters. Because demand is low when automobiles are produced slower due to a recession, platinum’s value decreases.
Platinum’s price fluctuates more
In a similar vein, platinum’s price varies more than gold’s. Because demand fluctuates, the price fluctuates are witnessed. Platinum is often more valuable than gold, but it is more liable to lose value.
On the other hand, Gold has recently been valued more than platinum. To discern trends, the most well-informed investors look at the price discrepancies between the two metals. This price disparity is often expressed in form of a ratio. As a result, platinum is less expensive than gold if the ratio is more than one. On the other hand, Platinum is costlier than gold if the ratio is less than one.
Gold is easier to mine in more places
Gold can be found almost anywhere on the earth, and governments global mine it. Because gold is located at the earth’s surface, mining it is simple. Platinum is only found in a few places, mainly in South Africa.
According to some studies, there is more platinum in the soil than gold, but it is majorly more profound and harder to find. Another study, on the other hand, contradicts this claim, claiming that platinum is 30 times rarer than gold. Platinum is far more difficult to mine than gold, resulting in gold’s more utility and practicality.
Gold has historic value as a currency
For millennia, gold has been used in a form of payment. Many investors make investments in gold to complement traditional equities and bonds because gold may be used to replace fiat currency in the Case of an economic downturn. On the other hand, Platinum cannot be used in the same way. While it has value outside the stock market, it is more difficult to dispose of than gold.
Do you need to buy platinum?
The answer is conditional on where you are in your investment path. Having a diverse precious metal portfolio probably be beneficial in usual. If you want to achieve that, platinum is an attractive option. Gold and silver will be your safest option if you’re just getting started with precious metals. They have shown their stability after centuries of usage in form of both money and a commodity. They have a stable market that generates major profits.
Which is the best option for you?
Gold is probably your best bet if long-term investing and stability are important to you. Gold is in high demand almost all of the time, and it is only increased during economic downturns. Platinum, on the other hand, is often associated with a growing economy and may fluctuate dramatically in favor.
However, if the economy is improving and the manufacturing and industrial sectors are extending, platinum may be a great short-term investment with higher returns than gold.
It’s critical to understand your overall investment goals before selecting a precious metal to make the investment in. Determine them first, then look into your commodity possibilities to see which one best fits your needs.
What Is the Most Effective Way to Invest in Platinum and Gold?
Purchasing actual gold or platinum is perhaps the easiest way to make an investment in these precious metals. Bullion and bullion coins are large amounts of platinum, gold, or other precious metals in the form of coins. Bullion is sold by coin merchants, brokerage companies, precious metal dealers, and institutions.
Collectible coins include gold and platinum. These coins may have historical or aesthetic importance and their metal value.
If you don’t want to hold the metals directly, you may make an investment in gold or platinum bullion through equities, mutual funds, and exchange-traded funds (ETFs). These provide more liquidity and do not necessitate safe storage.
Precious metals like platinum and gold appeal to investors trying to diversify into the commodities market, and each has its own set of strengths, hazards, and market patterns. When deciding between platinum and gold, it’s important to evaluate your long-term investing goals and your price fluctuation tolerance. Before you make an investment choice, do your homework.