An ounce of gold is – give or take – $1,200, while platinum sits at just below $1,000. So the gold price is 1.2 times that of platinum. The all-time high – at least since the great monetary reset of 1971 – is 1.4 times. This occurred in 1983.
Meanwhile, in 2008, platinum went to almost $2,300 an ounce. The gold price was just over $1,000 at the time. In other words, an ounce of gold was worth less than half an ounce of platinum. Now an ounce is more expensive.
The trade then was to sell platinum and buy gold with the money.
This is not MoneyWeek making a bearish call on gold, by the way. This theme of social division, which MoneyWeek mentioned last week, has not gone away. In fact, in the space of just seven days, thanks to the US immigration fiasco, it has got worse. It’s here for the time being and I don’t really see it getting much better. Moreover, there is the gold-bullish possibility of inflation making a return.
But these same factors that will push the gold price up, should also push up the platinum price – or at least they shouldn’t negatively affect it. Platinum is a precious, hard asset and hard assets do well in inflationary scenarios.
There is also the added possibility that what seems like a permanent supply deficit in platinum may actually start to count for something in terms of pushing up the platinum price. There’s also the fact that platinum is sitting below its cost of production, an anomaly which should eventually right itself.
MoneyWeek‘s main concern with platinum is that demand will fall, due to falling demand for diesel catalytic converters with the onset of electric cars, self-driving cars and this general change of sentiment towards diesel engines after the Volkswagen scandal. (A higher oil price might boost demand for diesel, but we will wait and see about that.)
All in all, platinum needs a better story. But narratives often develop with a rising price, so it may be that we get that narrative further down the road.
The other possibility is that gold falls, of course, and that’s a very real possibility. Should that be the case, MoneyWeek argues that the platinum price will not fall by as much as the price of gold, for the reasons stated above.