Gold has been a popular investment asset for a long time. Another precious metal that is commonly used in jewelry and manufacturing is platinum.
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If you’re considering diversifying your portfolio to include commodities, you might be wondering which is better, gold or platinum.
In this article, we will look at all you need to know about investing in gold and platinum.
All You Need to Know About Platinum
As a material, platinum is much rarer than gold. According to the World Platinum Investment Council, it’s around thirty times rarer than gold as only around 190 metric tons of platinum are mined annually around the world.
This is in contrast to the approximately 3,300 metric tons of gold mined worldwide annually.
Platinum doesn’t have the same high profile as gold historically, either.
Throughout history, you can see tales of gold rushes and gold mining but this isn’t true for platinum. However, platinum does have a wide variety of practical uses as it is a very dense material that is also malleable.
Platinum is commonly used in several manufacturing industries such as the automotive industry, aircraft industry, and medicine. Platinum is also popular as a material for jewelry.
As platinum is so versatile and used in so many different industries, its price is driven by industrial supply and demand and is in turn, affected by the economy.
Gold is less affected by these factors so you will find that the value of platinum fluctuates more than the value of gold.
When it comes to trading in platinum, you have several options. You can trade in physical platinum but you can also opt for mutual funds, stocks, or exchange-traded funds (EFTs) that use platinum bullion. There are also platinum options and futures available for investment on the New York Metals Exchange (NYMEX)
All You Need to Know About Gold
Gold has always been a valuable commodity dating back through millennia.
For several decades the gold standard was the basis of the international monetary system and was also the standard within the US.
The gold standard was dropped, however, due to the fluctuations and volatility of gold’s value.
Like platinum, gold has a variety of industrial uses and this can affect the price, however, it has less of an impact on the value of gold.
Unlike platinum, most of the demand for gold doesn’t come from these industrial uses but is instead driven by jewelry and investment.
Gold has long been used by investors to diversify their portfolios and as a protection against economic downturns.
Generally, when the stock market goes down and the economy suffers, the price of gold rises and vice versa.
You can invest in gold in similar ways to platinum. It can be bought physically in the form of bullion or coins and there are several sources for this, such as precious metal dealers, coin dealers, brokerages, and even banks sometimes.
You can also invest through ETFs, stocks, or mutual funds that have gold investments. Finally, you can also invest in options and futures on the NYMEX.
Gold vs. Platinum: Price
Generally, gold trades at a higher price than platinum. Although there have been historical instances of platinum being worth more per ounce than gold, gold overtook platinum in 2011 in value.
At the time of writing this article, the value of gold and platinum were as follows:
- Gold – $1,759 per ounce
- Platinum – $902 per ounce
The difference in price between the two precious metals is an intercommodity spread. Sometimes platinum trades at a premium to gold and vice versa.
Gold vs. Platinum: Investment Characteristics
Generally, gold and platinum behave similarly over the long term. The difference in their price is the result of independent factors that affect the two metals differently.
Platinum’s price tends to fluctuate more than the price of gold. This is because platinum’s price is largely influenced by two different factors.
These factors are industrial demand and mine production.
We stated earlier that platinum is used in a variety of different industries as a manufacturing material so whenever the market is on a downturn and manufacturing slows, the price of platinum will decrease.
Platinum is largely mined in South Africa and Russia. As only two countries produce the lion’s share of platinum, any kind of supply issue in one of them will have a large impact on the price of platinum.
The combination of industrial use and the mining situation means that platinum not only fluctuates in price more than gold but makes it the most volatile of all precious metals.
For example, platinum hit a high of $2,250 per ounce in 2008 but dropped to $777 within six months.
Gold, however, is more stable. The demand for gold is less reliant on industry and it is mined in several countries, such as Australia, Canada, China, India, and the US.
Disruptions to mining and supply in one country will have less of an impact on the supply of gold.
Gold’s stability makes it the precious metal of choice for investors who are looking for hedges against inflation or market downturns.
Many investors purchase gold so that it can be sold during times of economic trouble as this is when gold is at its highest price.
Gold vs. Platinum: Final Thoughts
There is no definitive answer to which is best to invest in. Whether gold or platinum is the best investment for you depends on your investment strategy.
If you want to invest in something stable and are looking for a long-term investment, then gold is the better choice. Gold is always in demand and usually increases in price during market downturns.
In contrast, platinum usually performs better when the economy is growing due to its ties to industry and manufacturing.
This makes platinum a good choice for short-term investment as it can spike with larger and more immediate returns than gold if your timing is right. It can also fall more quickly, so be careful.
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