Gold or Platinum? What is the best investment options for the next 5 years?
Platinum and Gold are two of the well-known, recognized and utilized precious metals. Both have value in their use in jewellery and industrial applications, whether in catalytic converters Platinum or electronics Gold. Platinum is a silver-coloured metal that is a durable and dense metal commonly used in the manufacturing of car and plane parts. Gold is a yellowish metal that is popularly used to create jewellery. Common phrases like “gold standard” and a record going platinum may have new investors wondering: are Platinum a better investment than Gold?
Gold is known to have a good hedge against currency debasement and inflation. When the equity markets crashed last year, Gold had a bull run for several months- a trend that experts predict will continue in the current state of economic turmoil. The performance of Gold depends on several factors like inflation, global trade of the metal, and other geopolitical issues.
During these kinds of unpredictable circumstances, it has been recorded that gold prices have remained stable, outperforming other asset classes and, at the same time, absorbing economic shocks better. Inflation brings about a significant rise in the price of Gold because it erodes the value of money by lowering the Dollar’s purchasing power.
Thus, Gold becomes a hedge against inflation as, over a more extended period, it is seen to offer higher-than-inflation returns. With the Rupee underperforming, the economy is experiencing currency debasement- a time when Gold can act as an attractive investment tool.
Platinum is considered an industrial metal. The most significant demand for Platinum comes from automotive catalysts, which are used to reduce the harmfulness of emissions. After this, jewellery accounts for most of the market, and Petroleum and chemical refining catalysts and the computer industry use up the rest.
Because the auto industry has a heavy reliance on metals, platinum prices are primarily determined by the number of auto sales and production numbers. The aspect of “Clean air” legislation could be required for the automakers to install more catalytic converters and raise demand. In 2009, Japanese and American carmakers started turning to recycled auto catalysts or using more of Platinum’s reliable—and usually less expensive—sister group metal, palladium.
Investment in Platinum
We have a very popular culture that often highlights Gold as the most desirable and admirable metal. So, you might think that it would make it a more incredible rarity than Platinum. But Platinum is around thirty times rarer than Gold. Approximately 190 metric tons of Platinum have mined globally annually, then the 3,300 tons of Gold.
Platinum doesn’t have the same history and value as Gold holds. However, it serves a number of uses, partially because of its structure. It is highly dense but very malleable, giving it value in industrial processes and settings. So, you locate it in the medical field, auto industry, aircraft industry, jewellery and other sectors.
Because of its applicability in many industries, Platinum is driven more by industrial demand and supply, and Platinum’s price always keeps fluctuating more often compared to Gold.
You can easily trade in with Platinum physically, like with coins, or turn to stocks, ETFs or mutual funds that platinum bullion. There are even platinum options available and futures on the New York Metals Exchange (NYMEX).
Investment in Gold
Gold has always been holding a longstanding history in terms of its value, dating back to an ancient time of civilizations. From as far back as the civilizations era to the U.S. standards of Gold, it holds a place in our economic systems and popular culture.
Gold is always considered unique for the kind of durability it has, and it doesn’t rust or corrode. It has the malleability and the ability to conduct both electricity and heat. It has some of the major industrial applications in the electronics and dentistry field, but we know it principally as a base for jewellery and in the form of money.
The value that gold holds is again determined by the market 24 hours a day and seven days a week. It trades predominantly as a function of sentiment—its price is less affected by the laws and regulations of demand and supply. The new mine supply is widely outweighed by the sheer size of above-ground, hoarded Gold.
But while Gold has formed the backbone of monetary systems before, it now fluctuates according to supply and demand. Gold also has an industrial market, like Platinum, because of its use in electronics, dentistry and aerospace and many other things. But, looking at the industrial applications doesn’t play as big a part in its price as the case in Platinum.
Although, most of the demand for Gold stems from jewellers and the investment sector. Most investors use it to diversify when economic conditions take a downturn. So, prices go up when a slowdown or financial crisis is based on investor sentiment and needs.
Similar is with Platinum, where you can easily invest in Gold by buying it physically. That includes collectable coins or bullion from different brokerages, precious metal dealers, coin dealers and some banks. If you don’t want the physical investment, then you can purchase stocks, mutual funds or ETFs that invest in Gold. There are even gold products on the NYMEX.
Investing in Platinum vs Gold: Difference in Price and Liquidity
Over 32 years, there were a few historical instances where Gold’s price per ounce outperformed Platinum. The highest point was in the 1970s, mainly due to stagflation, which is slow economic growth combined with inflation. Although, there have been times when the metal Platinum has held a higher value. From the time of 1987 to September 2008, Platinum tended to trade at a higher price than gold, and the cost of Gold per ounce only started exceeding Platinum’s price following 2011.
As per APMEX, as of Jan 2022, Gold is trading at $1,801.30 per ounce, while Platinum is being traded at $976.20 per ounce. Platinum is more difficult to produce as compared to Gold, as it’s located more profound in the earth and needs a more difficult process of purification. It is known to be highly dense, but it is an incredibly malleable metal with importance for industrial applications, including catalytic converters for turbine engines for planes and cars. It’s even used in medical devices such as pacemakers and jewellery.
In 2019, 3,463 tons of gold were mined globally. It is mainly produced in China, Australia, and Russia. It is used in some of the industries, including dentistry, computers and other electronic devices, in the aerospace industry, and, most commonly, in jewellery and other artistic applications. Governments and individuals have been storing quantities of Gold because of its perceived value as an alternative currency.
The price differential between the Platinum and Gold is considered an inter-commodity spread. As Gold sometimes trades at a very premium to Platinum. This relationship between the two helps investors to understand sentiments going in the market.
Using the ratio of both, customers can pay easily Gold’s price by Platinum’s price. The resulting ratio hence indicates whether Platinum is a worthwhile investment. Anything greater than one means that Gold is more expensive than Platinum. But if the balance is less than 1, Gold is cheaper than Platinum.
Platinum and Gold always tend to move in the same direction as other important metals. The price differential presents supply and demand and most of the economic issues that affect the two metals independently. Platinum holds its importance in the automobile industry, and Gold’s status is called a refuge in the economic fall.
Understanding the price of Platinum which is relative to the cost of Gold—the inter commodity spread. It can easily yield important clues according to current market sentiment. When separation occurs, profitable trading or investing opportunities often arise.
Both of the metals are liquid, as you can trade them for cash relatively quickly. But, Gold is the one metal that is more liquid because of the high volume and speed of trading, which occurs almost every day worldwide.
Investment Characteristics of Gold and Platinum
For the major part, Gold and Platinum tend to move in a similar direction long-term, and their price differences come down to the number of issues that always affect both the metals separately.
Platinum’s price comes down to two the main reasons. They are always in the industrial demand, particularly for anti-pollution equipment in vehicle engines, jewellery and medical supplies and mine production. Mines in South Africa are a vital determinant in the price of Platinum and production done in Russia.
Platinum has its dependency on industrial demand, and mine production leads to volatility. The price of Platinum fluctuates the most in the list of major metals. For instance, the platinum price hit its peak in 2008 at $2,250, and it then came down to $777 per ounce within the time of few months.
In opposite, Gold is more stable and reliable, and you are less likely to see an erratic price level that goes down in Gold because of its intrinsic value. There are multiple countries that produce Gold, like China, Australia, India, Canada and U.S. So, there is a supply issue in one nation that is unlikely to impact pricing worldwide severely.
Because of this, people often want to invest in Gold in times of disaster, like the 2008 financial crisis, when investors got their financial protection in Gold, and the prices doubled. Mainly investors use it as a hedge against inflation in currency due to this security.
Platinum vs Gold
Some investors may want to prioritize the stability and long-term investing procedure. In that case, Gold is likely the better option, and the precious metal has a longstanding history of reliable demand.
On the other side, Platinum usually performs better during economic growth. When the manufacturing and industrial industries experience a boom, the prices often experience the same thing. Therefore, it is a valuable short-term investment that usually comes with more incredible, immediate returns than Gold. That kind of comes with volatility. As a result, Platinum may be considered a better suited to investors with higher risk tolerance.
|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, the difficulty of mining and production, and ties to the auto industry||The price fluctuates but is more stable over time due to its place as a refuge during downturns|
|Applications||Industrial, auto and aeroplane manufacturing, jewellery, medical||Dentistry, computers and electronics, aerospace, jewellery, the arts|
|Price as of June 7, 2020||$1,175 per ounce||$1,897 per ounce|
|Volume as of June 7, 2021||9,171||118,913|
|Future Exchanges||CME Group and the Tokyo Commodity Exchange||CME Group and the Tokyo Commodity Exchange|
In the end, most precious metals have their uses as investments. When talking about political or economic uncertainty strikes, the majority of investors often make their choice to alternative or tangible assets to protect their portfolios. Precious metals like Gold are just one option available to you. But all kinds of investments come with some risks. The other precious metal, Platinum, carries a greater level of volatility than other choices, making it more susceptible to price drops.
Suppose the economy is trending upward and industrial and manufacturing industries are rising. In that case, Platinum can make an excellent short-term investment that bears much higher immediate returns than Gold.
If your priority is more toward long-term stability and investing, Gold is probably your best bet. There is virtually always some demand for Gold, which is only heightened during economic downturns. On the other hand, Platinum tends to be tied closely with a booming economy and can swing significantly in popularity.
It ultimately depends on your investment strategy, your diversification requirements, and your aim. If you are one who is considering alternative or non-traditional investments, then you can seek out the help of a financial advisor. They can walk you through your choices or needs and find options that fit your situation.
Process of Investing in Gold or Platinum.
One of the simplest and most straightforward methods to invest in Gold or Platinum is to buy all of the physical metals. Bullion and bullion coins are found in bulk quantities of Platinum, Gold, or other precious metals. You can purchase bullion from coin dealers, brokerage firms, lovely metal dealers, and some of the major banks.
Gold and Platinum can even be found in collectable coins. These coins have value beyond the metal material and may have historical or aesthetic worth.
If you don’t want to own these metals physically, you can buy stocks, mutual funds, and ETFs that invest in Platinum or gold bullion, and these offer more liquidity and don’t require secure storage.