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The changing platinum-gold ratio

Platinum has traditionally been a more expensive metal than gold. Are we seeing a return to this state of affairs? Either way, the future bodes well for precious metals in general.

Published: 23-01-2013 00:00

The changing platinum-gold ratio

Maybe it’s been all the talk about creating a platinum coin that did it. Whatever the reason, last week was the first time that platinum’s price rose above gold’s, for the first time since the middle of 2011.

Traditionally, throughout history, platinum has actually been pricier than the yellow metal. Today, platinum and gold prices are about the same level, with gold barely ahead. The situation is a far cry from recent decades, as we are about to see.

Platinum and gold over the past 40 years

Before gold’s rise during the 1970s, it averaged at US$35.94/ounce in 1970 (source: kitco.com), while platinum was at US$151.67/oz., more than four times gold’s price.

By 1980, with the dollar’s link to gold having been severed for a decade, gold shot up to US$612.56.oz., and platinum was at US$677.31/oz., no longer multiple times more expensive.

In 1990, after a decade of corrections, gold was at US$383.51/oz. Platinum didn’t fall as much, at $466.95/oz..

In 2000, gold was at US$279.11/oz., while platinum strengthened at US$544.03/oz., nearly double gold’s price.

2008 was a peak year for platinum, which surpassed the US$2,000/oz level and averaged $1,573.53/oz. for the year, before declining and not reaching this level since.

Meanwhile, gold in 2008 reached the US$1,000/oz. level for the first time ever, before settling lower, averaging $871.96/oz. for the year.

Since then, platinum has declined in price before steadily rising once more. Gold, during this same period, has risen faster, to the point that the two metals are at about the same price level, of around US$1,680/oz. (as of January 23, 2013).

Platinum’s rising?

If you are a precious metals investor, chances are you have your wealth stored in gold, and not in platinum. The recent jump in platinum prices is bound to open some investors’ eyes to this rarer metal.

It is foreseen by some that platinum will soon rise relative to gold, and stay above as before. Add the fact that there are supply issues compounded by labor troubles.

Based on the preceding information, what is an investor to go with, gold, or platinum?

Instead of betting on one or the other, it might be more practical to focus on the fact that precious metals as a group are looking attractive, as an alternative to devaluating currencies. Both platinum and gold, not to mention silver, are set for higher gains in the years to come.