Why is Platinum Cheaper Than Gold?
Although gold is considered the king of precious metals, platinum offers applications that gold doesn’t. This includes the widespread industrial use of the metal in the production and manufacturing of jet planes, engines and other materials that require stability at high temperatures.
Its density and ability to act as a catalyst during chemical reaction also make it ideal for use in combustion parts, dental materials, electronics industry, glass manufacturing and the auto industry. Even though the exact data doesn’t exist, platinum is estimated to be used in 20 percent of all manufactured products.
With all these properties, how is platinum just above half the price of gold at the moment? We’re here to break it down.
Value of Platinum
Currently, platinum’s price per ounce stands at $892 (subject to change) but this wasn’t always the case. Since the late 1960s and early 1970s,—when it first garnered the interest of investors—platinum has a few series of record surges—the most at over $2,000 per ounce in 2008—and series of record plunges.
A number of factors have been responsible for both its demise and rise, a few of which include:
- Its strong industrial demand—especially in the chemical sector—in 2006
- Its high industrial demand during the popularity of diesel cars—platinum is used as an auto catalyst
- The fall in supply—due to local regulatory and political issues in South Africa in 2007—and the rise in demand
- The increase in the demand for electronics and hard disks between 2006 and 2008
- The increased demand of Rhodium and Palladium—both are from platinum metals group and acts as an alternative to the metal—in 2007
- It’s increased use in jewelry in 2008.
After 2008, platinum’s prices fell significantly, and its average value remained between $800 and $1,700. In 2015, the metal became engulfed in scandal as Volkswagen was found to be lying about their emission data and its value dived to a record low. It gained momentum back in early 2018 but the trend has shown low prices overall.
Now, with rising uncertainties around the globe, political conflicts and global recession, platinum has stayed under $1,000 per ounce. Analysts and reports suggest that by the end of this year and in next year’s platinum’s demand will increase once again, causing a surge in prices.
This is what makes the precious metal a perfect investment opportunity in today’s economic climate. Not only does the metal have a history and unmatched value, its industrial applications are also increasing so the prices are expected to increase.