Gold or Platinum? Here’s How To Choose
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With hundreds of use causes—from auto-catalysts for diesel engines to jewelry—platinum is one of the most versatile precious metals. In fact, some investors prefer it over gold—and for good reason. After tumbling 14 percent last year, it has emerged as the cheapest alternative to bullions and palladium.
With global production of 160 metric tons, the price of platinum is currently at 989 USD per ounce, and is estimated to rise to 1,085 USD per ounce. At this price, the demand for platinum has reached 7.88m ounces globally.
Even though conventional investors opt for gold, some are now moving in favor of platinum. But there’s still no definite trend. Here’s how you can choose between the two precious metals.
Environmental Concerns: Fall in Demand for Platinum
As of 2018, platinum was deemed the weakest ranking precious metal. This was attributed to growing concerns about environmental sustainability, that was threatened by diesel-powered vehicles.
Furthermore, the instability in the equity market and the Fed’s decision to bring down interest rates boosted gold prices to a five-year record high. Since gold prices went up, platinum suffered as a substitute precious metal.
Relative to the upsurge in the market value of gold, platinum funds are at a five-year low.
The Asymmetric effect of the Gold Market on Platinum
Since platinum has a much smaller market compared to gold, even a slight change in gold funds has an exponentially huge impact on platinum prices. This can be termed an asymmetric impact. While gold bullions traded for $1,289.39 this year, spot platinum sold for $799 an ounce.
If the interest rates go even lower or investment pattern shift away from unsafe equities, the price of bullions could even exceed $1,400. In comparison to the volatility seen in gold markets, platinum offers a more compelling choice. Though small, the market for this metal is expected to remain in surplus.
Competitive Pricing
The World Platinum Investment Council forecasted that the supply of this metal would exceed demand by 455,000 ounces in 2019. This was a reduction from the 505,000 oz excess supply in 2018. Paired with this, consumption is also moving upwards by 2%.
With excess supply having a downward pressure on the market price, platinum is soon going to secure a stronger market niche. This is a promising start for it to maintain a more favorable reputation in the community of investors. All in all, platinum is emerging as quite a catch.
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