Platinum Versus Gold

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Poet's picture
Poet
Status: Diamond Member (Offline)
Joined: Jan 21 2009
Posts: 1891
Platinum Versus Gold

I'd like to inquire about physical platinum or a physical platinum fund versus physical gold or a physical gold fund.

Obviously both are precious metals, both have jewelry and industrial uses.

Here's a chart comparison, Platinum from 1992 to Present, then Gold from 1995 to Present. Platinum is supposed to be more expensive and rarer than gold. And yet as you can see, at some points in the past, there was practically a parity in price (I believe the Russians had something to do with it).

And now with gold around $1,500 per ounce and platinum around $1,800 per ounce, it makes me wonder... Anyone here care to give some consideration to the topic of investing in platinum versus gold? What are the supply histories and outlook, versus the demand history and outlook?

Poet

Montana Native's picture
Montana Native
Status: Silver Member (Offline)
Joined: Mar 17 2009
Posts: 166
Platinum

Poet,

From a historic perspective gold and silver are considered money. Central banks hold gold and it is an ancient currency, platinum on the other hand was fairly recently discovered by new world explorers.  The jewelery and automotive catalyst industry are the main consumers of platinum from what I've read, although investment demand has probably risen over the years. On the weak end of platinum investment I see a substitution effect coming from its sister metal palladium. Palladium is much cheaper, can also be utilized as a catalyst and when alloyed correctly will look like platinum, it would be much lighter though.

Pretty sure the only platinum/palladium mine operating presently in the lower 48 is Stillwater mine in Montana. Where gold and silver are mined many places, the concentration of platinum/palladium mining is South Africa, Russia, and North America. As far as your Russia story, it was my understanding that Norislk Nickle likely stockpiled large amounts of palladium and probably platinum over decades of mining nickle. Although it's basically a state secret, there have been rumblings that those stockpiles have been or are being depleted. That could have been part of the big move in palladium last year.

Hope that helps a bit, in closing.... almost all the gold mined is still held while plenty of silver, platinum, and palladium end up in the landfill. The landfills that will probably be mined one day...lol.

PastTense's picture
PastTense
Status: Bronze Member (Offline)
Joined: Dec 13 2010
Posts: 47
They don't really have much

They don't really have much in common: You invest in platinum because you think there will be a major growth in the autombile industry; you keep you wealth in gold because you want to preserve the purchasing power of your wealth in an inflationary economic scenario.

Tycer's picture
Tycer
Status: Platinum Member (Offline)
Joined: Apr 26 2009
Posts: 610
A good article on

A good article on platinum:

http://mysite.du.edu/~jcalvert/phys/platinum.htm

ao's picture
ao
Status: Diamond Member (Offline)
Joined: Feb 4 2009
Posts: 2220
Tycer wrote: A good article
Tycer wrote:

A good article on platinum:

http://mysite.du.edu/~jcalvert/phys/platinum.htm

Interesting article.  Thanks.  I agree with the article that platinum is unappealing visually.  Silver coins are much more attractive than platinum coins.  Very heavy stuff though at a density of 21.45 g/cm3.

sundarb's picture
sundarb
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Joined: Jan 10 2011
Posts: 72
Stocks to Flow

Platinum and gold are like chalk and cheese...both in literal and economic terms.

Stocks to flow ratio of gold is the highest of most goods, in the sense that the annual production of gold is a very small fraction of the overall gold that exists above the ground. I think the stocks to flow ratio of gold is like 80x. One of the reasons why gold is an excellent choice for money.

Whereas, the stocks to flow ratio of platinum is 0.05x...there's very less platinum above the ground and annual production that adds to the supply is a significant addition to the stocks. This is the primary reason why the price of platinum is prone to be much more volatile/violent than gold. Platinum is also more of an industry metal than a monetary one, therefore the price also correlates well with industrial growth. Greater demand in the industry leads to higher price. I remember reading somewhere that platinum/gold ratio chart has a close correlation with S&P 500.

If you believe there will be future industrial growth (therefore more demand for platinum) and can stomach the catastrophical price fluctuations at the margin (due to the low stocks to flow ratio), investing in platinum then makes sense.

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