Platinum Vs. Gold
Gold and platinum are both precious metals that possess special qualities. In 2018, 3,332 tons of gold and about 165 tons of platinum were mined globally. The majority of platinum production comes from two countries: South Africa and Russia. Gold is produced in many more countries, with China, Australia, and Russia making up the top three.
Platinum is more difficult to produce than gold, as it's buried deeper in the earth than gold and requires a more difficult process to purify.
Platinum is a very dense but incredibly malleable metal. It has important industrial applications, including in catalytic converters for cars and turbine engines for planes. It also is used in medical devices such as pacemakers and in jewelry.
Gold is used in dentistry, as an electrical conductor in computers and other electronic devices, in the aerospace industry, and, most commonly, in jewelry and other artistic applications. Many governments and individuals store quantities of gold because of its perceived value as an alternative currency.
The price differential between gold and platinum is an inter-commodity spread. Over the course of history, there have been times when gold has traded at a premium to platinum and vice versa.
Since 1987, platinum has usually traded at a higher price than gold, but on September 12, 2019, gold was trading at $1,503.69 an ounce compared with $960.60 an ounce for platinum.
In 2008, platinum traded to a modern-day high premium to gold of more than $1,200 per ounce. Since January 2015, gold has consistently traded at a premium to platinum. As of mid-September 2019, the premium was about $550.
Characteristics and Features
Each metal has different trading characteristics. Gold is an extremely liquid market. Each day, buyers and sellers trade huge volumes of gold on world markets. The two most important futures exchange for gold are the COMEX division of CME Group in New York and the Tokyo Commodity Exchange.
The COMEX gold futures contract is one of the most liquid commodity futures in the world; its daily trading volume represents about 27 million ounces of gold. Gold also trades on the over-the-counter market as well as in physical markets around the world.
The most important futures exchanges for platinum are the NYMEX division of CME Group in New York and the Tokyo Commodity Exchange. Platinum also trades in over-the-counter and physical markets. Its options trading volume is much smaller compared with gold. Because of the difference in liquidity, platinum is more susceptible to price spikes than gold is.
Platinum and gold tend to move in the same direction, along with other precious metals. The price differential between the two represents the supply and demand and economic issues that affect the two metals independently, including platinum's importance in the automobile industry and gold's status as a refuge during economic downturns.
Understanding the price of platinum relative to the price of gold—the inter-commodity spread—can yield important clues as to current market sentiment. When divergences occur, profitable trading or investing opportunities often arise.