Gold has attracted humans for millennia, and many would say that it is the quintessential precious metal. However, while such a statement is not necessarily inaccurate, gold bars and coins are not your only investing alternative.
All precious metals share similar characteristics. They are superb wealth warehouses, well-known buffers against inflation and economic crises, and prudent long-term investments by their very nature. However, none of these metals are identical and must be handled differently.
Platinum is an excellent illustration of this. As two rich and beautiful precious metals, it is easy to view gold and Platinum as direct substitutes, distinguishing them from one another. Regarding their use in jewelry, this may very well be the case. However, as investment metals, each of these metals possesses a unique set of characteristics that may persuade you to invest in one or the other, or possibly both. Below, we examine the distinctions between Platinum and gold in further detail.
An Overview of Gold
We will begin with gold, the grandfather of precious metals. Gold's resilience (not rust or corrode), malleability, and ability to conduct both heat and electricity set it apart from other metals. It has specific industrial applications in dentistry and electronics, but it is best known as a jewelry component and cash.
The market around the clock determines gold's value every week. Gold trades primarily based on sentiment; its price is less influenced by supply and demand rules. The gold stockpiled above ground greatly outweighs the fresh mining supply. Said, when hoarders decide to sell, the price falls. When people desire to purchase, a new collection is rapidly absorbed, and gold rises.
Several reasons contribute to the rising desire for the yellow metal:
Systemic financial concerns: When banks and money are viewed as unstable and political stability is uncertain, gold is frequently sought as a safe store of value.
Inflation: When accurate rates of return on equity, bond, or real estate markets are negative, investors routinely seek out gold as a store of value.
War or political unrest: War and political unrest have always prompted people to hoard gold. It is possible to make a lifetime's worth of savings portable and keep them until they need to be exchanged for food, shelter, or safe transit to a less dangerous location.
An Overview of Platinum
Like gold and silver, Platinum is traded continuously on global commodity markets. Because it is so rarer than gold, it tends to command a more excellent price (per troy ounce) during the call and political stability. Less metal is extracted from the ground each year.
Several elements influence the price of Platinum:
Platinum, like silver, is regarded as a valuable metal for use in industry. The highest demand for Platinum is generated by automobile catalysts to minimize hazardous emissions. Following this, jewelry constitutes the majority of need, and the remainder is utilized by petroleum and chemical refining catalysts and the computer sector.
Due to the auto industry's significant reliance on metal, platinum prices are heavily influenced by automobile sales and production figures. Legislation requiring automobiles to install more catalytic converters could increase demand. In 2009, however, American and Japanese automakers began employing recycled vehicle catalysts or more of Platinum's dependable and typically less expensive sibling metal, palladium.
South Africa and Russia are the only countries where highly concentrated platinum mines. This increases the likelihood of cartel-like conduct supporting or artificially increasing platinum prices.
These variables combine to make Platinum the most volatile of the precious metals, so investors should keep this in mind.
There are investment opportunities when the gold-platinum ratio diverges (the price of gold divided by Platinum). Historically, the ratio has been less than 1, indicating that the cost of Platinum has exceeded that of gold. However, the balance is approximately 1,6, making Platinum more affordable and desirable.
Gold and Platinum are both precious metals. However, they are influenced by distinct variables when Platinum becomes unreliable. The price of gold is determined by investor emotion, not supply and demand, and it has lower volatility than Platinum.
South Africa and Russia are the only nations that produce Platinum, which is anotherștiind to consider. What occurs in these two countries will affect global platinum prices. In March 2008, platinum prices soared to $2,252 per ounce due to power delivery issues in South African miners. In November 2008, the price had fallen to $774. The turmoil in the auto industry could impact platinum prices.
We have never witnessed such wild fluctuations in gold prices. Countless nations, including China, the United States, Australia, India, and Canada, manufacture the yellow metal. The commodity price in a country is unlikely to be significantly affected by a problem with supply elsewhere. Despite the debate between gold and Platinum, gold remains the favored store of value. In 2019, however, the yellow metal posted an 18.9 percent increase. Due to their comparable values, investors can consider alternate precious metals, such as Platinum.
What's the Difference between Gold and Platinum?
Each year, around 190 metric tons of Platinum are extracted worldwide, and South Africa and Russia account for the vast majority of global platinum production.
Platinum is more complicated to produce than gold due to its deeper location and purification procedure. It is a metal with industrial applications, including catalytic converters for automobiles and turbine engines for aircraft, that is exceptionally dense and extraordinarily malleable. She is additionally utilized in medical equipment such as pacemakers and jewelry.
They extracted three thousand four hundred sixty-three tons of gold worldwide in 2009. China, Australia, and Russia generate the majority of the world's gold. 2 It is utilized in various industries, including dentistry, computers and other electronic devices, the aerospace industry, jewelry, and other aesthetic uses. Due to gold's perceived usefulness as an alternative currency, many governments and people hold large amounts.
Price
The difference in price between gold and Platinum is referred to as an "inter commodity spread." Throughout history, there have been moments when gold traded at a premium to Platinum and vice versa.
From 1987 until September 2008, when often traded Platinum higher than gold. Since 2011, the gold price has eclipsed the platinum price. 3 Platinum was priced at $1,175 per ounce compared to $1,897 per ounce for gold on June 7, 2021.
Specifics and Attributes
Each metal possesses unique trading characteristics. The gold market is quite liquid, and on global marketplaces, buyers and sellers trade enormous quantities of gold daily. New York's COMEX subsidiary of CME Group and Tokyo's Tokyo Commodity Exchange are the two most prominent futures exchanges for gold.
It is one of the world's most liquid commodity futures, with 27 million ounces of gold equivalent to daily trading volume.
Gold is traded on both the over-the-counter market and physical marketplaces throughout the world.
Platinum's two prominent futures exchanges are the CME Group's NYMEX subsidiary in New York and the Tokyo Commodity Exchange. Platinum is also traded on over-the-counter and physical markets, but its options trading volume is far lower than that of gold. Platinum is more susceptible to price increases than gold because of the difference in its liquidity.
Price Relativity
Platinum and gold, along with other precious metals, tend to move in the same direction. The price difference reflects supply and demand and economic factors that affect the two metals independently, such as Platinum's significance in the automobile sector and gold's role as a haven during economic downturns.
The inter commodity spread, which measures the platinum price concerning gold, might shed light on current market sentiment. When divergences emerge, trading and investment opportunities can exist.
Geopolitical Troubles
In addition to being more difficult to harvest and transport, the vast bulk of the world's Platinum comes from only two countries: South Africa and Russia. This limited pipeline accounts for more than 75 percent of the global platinum supply.
This means that the price of Platinum is susceptible to difficulties of economic stability in these nations and their foreign relations with the rest of the globe, particularly with the United States and China, as crucial vehicle makers and platinum consumers.
Closures of mines, international tariffs, and other limitations can significantly impede the process and make the price of Platinum highly volatile. This is best demonstrated by examining the platinum market in 2008. This was the year that the precious metal price plummeted from over $2,000 per ounce to around $800 per ounce. South African miners' electricity issues were a significant component of this situation.
Industrial Applications
In addition to operating as a store of value similar to gold, Platinum is utilized far more frequently in the industry. Indeed, gold has some applications in electronics and dentistry, but Platinum is a crucial component in the automobile sector.
This is due to Platinum's widespread usage in automobile catalytic converters, which assist reduce vehicle emissions. As a result, the auto industry's health has a significant impact on the value of Platinum, and the price of this precious metal often changes in tandem with its demand.
Moving into a future of renewable energy and electric vehicles may challenge Platinum. However, gold will almost certainly remain stable as a haven asset unaffected by industry. Despite being much heavier than gold, Platinum is also commonly employed in medical devices and is highly sought after in industry due to its malleability.
Which One Is Right for You?
Gold is likely your best bet if stability and long-term investment are your top priorities. The demand for gold is virtually always present, and during economic downturns, it only increases. On the other hand, Platinum is frequently associated with a thriving economy, and its popularity can fluctuate dramatically.
Nevertheless, if the economy is heading upward and industrial and manufacturing businesses are increasing, Platinum can be an excellent short-term investment that yields far more significant returns than gold.
How Could You Invest in Gold or Platinum?
Buying gold or Platinum in physical form is likely the simplest way to invest in these assets. Bullion and bullion coins are large amounts of Platinum, gold, and other precious metals. Coin dealers, brokerage businesses, lovely metal dealers, and some banks sell bullion.
There are also gold and platinum collectible coins, and these coins may have aesthetic or historical value and metal content.
If you do not physically possess these metals, you can invest in gold or platinum bullion through stocks, mutual funds, and ETFs. These provide greater liquidity and do not necessitate secure storage.
Here are some gold and platinum investment strategies:
Commodity Exchange-Traded Funds (ETFs)
Exchange-traded funds (ETFs) offer a convenient and liquid way to buy gold, silver, palladium, and Platinum. However, investing in ETFs does not provide access to the physical commodity, and therefore you have no claim on the metal held in the fund, and you will not receive actual gold or silver bars or coins.
Standard Stocks and Mutual Funds
The price movements of precious metals are reflected in the value of mining company shares. If you do not understand how mining stocks are priced, it may be prudent to stick to funds with established track records managers.
Options and Futures
The futures and options markets provide investors with liquidity and leverage for large metals wagers. Derivative items have the highest potential for earnings and losses.
Bullion
The storage of coins and bars is restricted to those with a safety deposit box or safe. Undoubtedly, bullion is the only alternative for those who anticipate the worst, but for those with a time horizon, bullion is illiquid and downright annoying to own.
Certificates
It's possible to hold physical gold without worrying about shipping and storage costs using gold certificates. However, certificates are worthless if you're looking for insurance in a natural catastrophe, and do not expect anyone to trade them for something of worth.
Precious Metals FAQs
Are Precious Metals an Attractive Investment for You?
Precious metals provide exceptional inflationary protection since they have inherent worth, are not subject to credit risk, and cannot be devalued. That implies you cannot print further copies. In addition, they offer "upheaval insurance" against financial or political/military upheavals.
From the perspective of investing theory, precious metals have a low or negative correlation with other asset classes such as stocks and bonds. Even a tiny proportion of precious metals will minimize portfolio volatility and risk.
Risks of Precious Metals Investment
Every investment carries a unique set of risks. There is always some danger involved with investing in precious metals, despite offering a certain degree of security. Metals' prices can fall due to technical instabilities (more sellers than buyers). However, economic uncertainty is advantageous for sellers as prices tend to increase.
What Advantages Does Investing in Precious Metals Offer?
Investing in precious metals offers several advantages over investing in stocks, including protection against inflation, intrinsic value, absence of credit risk, high liquidity, portfolio diversification, and purchase convenience.
What Are the Best Ways to Invest in Precious Metals?
One of the best ways to invest in precious metals is to buy the metal outright and keep it in physical form or purchase exchange-traded funds (ETFs) with an enabling act to precious metals or companies active in the precious metals industry.
Conclusion
Ultimately, precious metals can be utilized as investments. When political or economic unpredictability arises, investors frequently seek alternative or tangible assets to safeguard their portfolios. Precious metals such as gold are only one of your options. However, all investments include inherent risk. Platinum is more volatile than alternative options, making it more prone to price decreases. Meanwhile, gold is generally steady, but it may not be an effective inflation hedge shortly.
It ultimately depends on your investing plan, diversification requirements, and objectives. Seek the assistance of a financial professional if you're exploring alternative or atypical investing. They can help you through your options and help you find solutions that fit your circumstances.
Real-time News
