Investing in precious metals you will no doubt be attracted by the ever-present appeal of gold. There are many others that can also turn your head though. If you are looking for another relatively rare alternative to gold that has many practical uses within the economy and often trades in the same direction, platinum could be a great choice.
Here we will take a closer look at how the two compare from an investment perspective, factors that make both appealing, and some of the similarities as well as differences between both from a trading view.
Gold vs Platinum Pricing
When it comes to the spot prices, both of these precious metals rank quite highly when compared with others like silver. At present both are trading above $1,000 with gold tending to remain quite a bit higher than platinum. That, however, has not always been the case.
For many years platinum actually traded at significantly higher prices than gold. This reached a peak platinum price of more than $2,000 in 2008 although the price of gold also started to overtake platinum in the same year. For the last several years, gold has consistently traded above platinum in the market although both metals tend to benefit quite a lot from economic uncertainty and act as a store of value in times of economic crisis.
Given that both tend to move upward in times of difficulty for the economy it could be argued that platinum presents as better value for investment since it is typically more affordable nowadays than gold.
Industrial Uses of Platinum
Besides acting as a store of value much like gold, you will find that platinum is much more widely used in industry. Of course, gold does have some uses when it comes to electronics and dentistry but platinum is in fact a major component within the auto industry.
This is due to the fact platinum is widely used in catalytic converters for cars which helps reduce vehicle emissions. To this end, the health of the auto industry then is hugely important to the value of platinum and you will often find that the price moves in tandem with demand from this industry.
Moving into a future of renewable energy and electric vehicles may well be a challenge for platinum where gold will virtually always hold steady as a safe haven asset devoid of any outside influence from industry. Still, platinum is also widely used in medical devices and is generally sought in industry thanks to its malleable nature even though it is considerably heavier than gold.
Difficulty in Mining
Platinum is much rarer than gold in the sense that each year, a much lower amount of platinum is mined. In most years this can mean that 10-20 times more gold is mined around the world than platinum. Much of the reason behind this is the difficulty when it comes to extracting platinum.
Since it is found deeper in the earth it takes more time, resources, and ultimately costs are increased when mining platinum compared with gold. The physical characteristics of this precious metal also make it more difficult to process. Platinum has a much greater density than gold which can mean it is more labor-intensive in purification and production.
This relative rarity of platinum then, combined with the demand from industry, should work to keep prices high. The equation though is not that simple. On one hand yes, the rarity of this precious metal plays a strong role. Other factors though come into play. If costs to extract and purify platinum become prohibitively high for whatever reason, substitute metals for industry are often explored. The bottom line here is that to remain in demand for industry, a balanced price is favorable for platinum.
Both as a Safe Haven
There is never a question about the value of gold when it comes to being a safe haven asset. In times of uncertainty of crisis, those trading in any range of markets from forex trading to stocks can flock to invest in gold. For this reason, if you look at gold prices during any prolonged period of economic turmoil you will see a spike.
Almost all precious metals can play their role as a store of value to a certain point. With platinum though this is seen as a more reliable safe haven. Considering this, you will also tend to see investors move toward an asset like platinum during a difficult period. There are many factors that make gold a much better choice in this category though.
Chief among these is liquidity. Gold is a much more liquid asset than platinum. This comes from the fact that much more is mined and traded on an annual basis. Platinum is relatively illiquid when it comes to trading volume and thus, may appear less attractive. There are also a number of geopolitical concerns that may make platinum as a safe haven less appealing.
Besides already being more difficult to extract and get to market, the vast majority of platinum in the world comes from only two nations, South Africa, and Russia. This narrow pipeline accounts for more than 75% of the overall supply of platinum worldwide.
What this means is that at any time, the price of platinum can be vulnerable not only to issues of economic stability in those countries, but also their international relations with the world and in particular the US and China as major auto manufacturers and users of platinum.
Mining shutdowns, international tariffs, or restrictions of any sort can really work to hamper the process and make the price of platinum very volatile. This is exemplified in no better way than a look at the 2008 platinum market. This was a year when the precious metal hit an all-time high but also took a huge drop from over $2,000 to under $800 per ounce. One of the major factors behind this was power problems at South African mines.