Gold has long been popular as a financial asset and for its aesthetic value. Platinum is another precious metal that's used in jewelry and also has industrial applications. Both can be good investment choices, but there are differences in terms of long-term stability and price fluctuations.
What's the Difference Between Gold and Platinum?
About 190 metric tons of platinum are mined each year globally. The majority of platinum production comes from two countries: South Africa and Russia.
Platinum is more difficult to produce than gold, as it's located deeper in the earth and requires a more difficult purification process. It is a highly dense but incredibly malleable metal with importance for industrial applications, including in catalytic converters for cars and turbine engines for planes. It's also used in medical devices such as pacemakers as well as in jewelry.
In 2019, 3,463 tons of gold were mined globally. Gold is mainly produced in three countries: China, Australia, and Russia. It is used in several industries, including dentistry, 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.
|Liquidity||Much lower trading volume||One of the highest-volume commodity trading markets in the world|
|Long-Term Reliability||More susceptible to price swings due to lower liquidity, scarcity, difficulty of mining and production, and ties to the auto industry||Price fluctuates, but more stable over time due to its place as a refuge during downturns|
|Applications||Industrial, auto and airplane manufacturing, jewelry, medical||Dentistry, computers and electronics, aerospace, jewelry, the arts|
|Price as of June 7, 2021||$1,175 per ounce||$1,897 per ounce|
|Volume as of June 7, 2021||9,171||118,913|
|Futures Exchanges||CME Group and the Tokyo Commodity Exchange||CME Group and the Tokyo Commodity Exchange|
Here are factors to consider when it comes to investing in gold vs. platinum.
The price differential between gold and platinum is an "intercommodity spread." Over the course of history, there have been times when gold has traded at a premium to platinum and vice versa.
Platinum usually traded at a higher price than gold from 1987 until September 2008. Since 2011, the price of gold has exceeded the price of platinum. As of June 7, 2021, gold was trading at $1,897 an ounce compared to $1,175 an ounce for platinum.
On May 19, 2008, platinum traded to a modern-day high of $2,182 per ounce.
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 exchanges 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, but its options-trading volume is much smaller than gold's. 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 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 intercommodity spread—can yield important clues as to current market sentiment. When divergences occur, profitable trading or investing opportunities often arise.
Which Is Right for You?
If your priority is long-term investing and stability, then gold is probably your best bet. There is virtually always some level of demand for gold, and this is only heightened during economic downturns. Platinum, on the other hand, tends to be tied closely with a booming economy and can swing significantly in popularity
That being said, if the economy is trending upward and industrial and manufacturing industries are on the rise, then platinum can make a great short-term investment that bears much higher immediate returns than gold.
Before you choose a precious metal for investing, it's important to know what your overarching investment goals are. Determine these first, then research your commodities options to find the best fit.
How Do I Invest in Platinum or Gold?
Perhaps the most straightforward way to invest in gold or platinum is to buy the physical metals. Bullion and bullion coins are bulk quantities of platinum, gold, or other precious metals. You can buy bullion from coin dealers, brokerage firms, precious metal dealers, and some banks.
Gold and platinum can also be found in collectible coins. These coins have value beyond the metal material and may have historic or aesthetic worth.
If you don't want to own these metals physically, you can buy stocks, mutual funds, and ETFs that invest in gold or platinum bullion. These offer more liquidity and don't require secure storage.
The Bottom Line
Precious metals such as platinum and gold make attractive opportunities for investors looking to diversify into the commodities market, and each has its own strengths, risks, and market tendencies. When choosing between platinum and gold, it often comes down to your long-term investment objectives and tolerance for price fluctuations. Do your research before you make an investment decision.
Frequently Asked Questions (FAQs)
What's the difference between white gold and platinum?
White gold is not platinum, but it is a mix of metals that's designed to look like platinum. White gold is about 75% gold and 25% nickel and zinc.
What are some alternatives to investing directly in gold and platinum?
If you don't want to invest directly in commodities like gold and platinum, you can invest in companies that operate in the space. For example, miners can provide some level of exposure to the commodities mined by the companies.