Gold and platinum: partnership or competition?


According to analysts, for a long time, gold and platinum complemented each other. There were periods when one metal became cheaper, another – more expensive, but for the market, the ratio of their prices looked harmonious. At the present time, when the gray metal in relation to the yellow began to lose ground, the balance was broken, and peaceful coexistence gave way to the competition.

Over the past 40 years, platinum has been valued higher than gold, but at the moment, the situation has changed exactly the opposite. This was facilitated by the multidirectional dynamics of the world market. The first “bells” declared themselves in 1990 when after a decade of correction, the price of the yellow metal fell to $383. Platinum was more fortunate: its value reached the level of $466.

In 2000, the yellow metal fell even more, to $279, and the price of the gray metal, on the contrary, increased, reaching $544, which is almost twice the price of gold. Eight years later, the cost of platinum broke all records, breaking the mark of $2,000 per ounce. The average price of the gray metal was $1,573 per ounce. Subsequently, platinum fell again, and gold in 2008 reached $1000 per 1 ounce for the first time in its history. On average, the price of precious metal was $871 per 1 ounce.

According to experts, gold is usually ahead of platinum in price when investors fear political and economic instability. When the world economy is “firmly on its feet” and the level of confidence in the financial system is high enough, the gray metal takes the “reins” of yellow. That is why the ratio of gold to platinum grew during the boom in the yellow metal market in the 1970s and 2000s and declined in the bearish cycle in 1980-1990. Experts draw attention to an interesting fact: on January 23, 2013, both metals crossed in price at the same level – about $1680. However, since then, platinum began to fall in price, and now its rate is $800, and the cost of gold has increased and exceeded $1400. In the end, the yellow and gray metals are reversed from the point of view of their correlation, recorded 40 years ago.

The main reason for this sharp reversal in the ratio was the so-called “deselect” that occurred with the automaker Volkswagen in 2015. Four years ago, the company had a major scandal because of falsification of data on exhaust emissions of diesel cars. The “deselect” provoked the collapse of the market of diesel vehicles and demand for platinum, analysts said. The decline in demand led to a fall in the rate of precious metals. Recall, platinum is used in catalytic converters of cars, cleaning exhaust gases from harmful impurities.

According to the estimates of the World Investment Council for platinum, in the near future, we should expect an increase in investment demand for the gray metal. In the first quarter of 2019, the aggregate investment demand for precious metals amounted to 765 thousand ounces due to sales of platinum coins and bars. According to experts of the market of precious metals, this year, a significant decrease in platinum in relation to gold is not expected. Currently, the yellow metal is actively rising in price due to the growing demand for protective assets.

According to analysts, gold is more of an investment asset, and platinum – industrial, which determines the growth of the ratio between these assets in favor of the yellow metal. The gray metal is in the lead largely due to the status of a rarer precious metal. Experts believe platinum is highly underestimated, but in the long term, this defect will be corrected.

The material has been provided by InstaForex Company –